1/ Random thought: the current SPAC boom has accelerated so rapidly because PE/VC firms were/are in desperate need of a new method of exiting bad investments that they have been passing from one fund to another (increasing leverage each time) for ~15 years.

2/ PE funds have been generating (on paper) IRRs above their hurdle rates this way for years without adding any real value to their portfolio companies.
Once a company has been through an LBO, SBO, tertiary buyout and quaternary buyout, what are you left with?

3/ A stripped down company with excessive leverage and little-to-no potential for real growth.
That makes traditional exit options (IPO or strategic buyout) basically impossible, especially at an IRR anywhere near what LPs are expecting.

4/ So, GPs are jumping at the opportunity to merge their shitty portfolio companies into a SPAC. Then, they can pump the stock and promptly dump their stake on retail investors at an IRR well above their hurdle rate.

5/ The GP takes their 20% carry + fees and their LPs are happy enough to invest in the GP’s next fund. It’s a win-win for PE.

The losers in all of this? Retail investors, of course.

PE GPs to retail investors:

6/ Historically SPACs have mainly taken startups (& many total frauds) public. I think this new wave of SPACs will bring a variety of older, over-leveraged companies from vintage 2014 & earlier PE funds to market. They will be zombies posing as growth companies w/ a story to tell