The wave of shell company-led healthcare acquisitions has ebbed as valuations have dropped and financing has dried up.
Special purpose acquisition companies experienced a meteoric rise in 2020, when more healthcare companies turned to these "blank check" companies as an alternative to executing their own initial public offerings. SPACs, which raise money through IPOs and use it to acquire other companies and take them public, were involved in 119 deals across all sectors in the third quarter of 2020 valued at a cumulative $40 billion, according to consulting firm RSM's analysis of Bloomberg data.
So far this quarter, there have been 25 SPAC-led transactions valued at $4.1 billion, down from 437 deals worth an estimated $129.6 billion in the first quarter of 2021.
"The SPAC frenzy has really cooled, but it still brought public equity markets to healthcare," said Matt Wolf, director and senior healthcare analyst with RSM. "We have seen the crest in SPAC activity so to speak, but it's not going away."
SPACs have attracted biotech, digital health and provider organizations that want to get to the public market quicker, while retaining a stake in their business and gaining access to liquidity. Traditional IPOs require companies to pitch sales presentations to a variety of potential investors, whereas SPAC-related transactions only require the convincing of one party.