Special purpose acquisition companies are making a notable return in the US capital markets this year, following a significant plunge from the highs of 2020 and 2021.
SPACs are companies formed to raise capital through an IPO so that they can later purchase or merge with an existing listed company.
According to data from Dealogic obtained by IFLR, SPAC activity in the US averaged 430 deals per year across 2020 and 2021, reaching a peak valuation of $162.6 billion in 2021 alone.
However, SPAC volumes saw a significant decline between 2022 and 2023. In 2023, only 31 SPACs were recorded, amounting to under $4 billion in total value.
But recent figures suggest a change in momentum. In 2024, SPACs raised $9.6 billion across 57 deals, according to Dealogic data.
That rebound appears to be accelerating in 2025, with 48 SPACs raising around $10.1 billion so far this year.
We speak with Edward Best, co-chair of the capital markets practice and partner in the corporate and financial services group at Willkie in Chicago and New York, to understand the key SPAC trends for 2025.
He delves into the reasons of the SPACs slow down, what’s driving their return and where capital markets opportunities lie for Willkie.
Back with no frenzy
While SPACs volumes might show signs of recovery, they’re different from what they used to be four years ago.
“The SPAC market is rebounding, but it's no longer the frenzied, high-volume space it was four years ago,” Best tells IFLR. “Today, it's a more specialised niche.”
He explains that gone are the billion-dollar deals driven by celebrity endorsements and broad retail investor enthusiasm.
Instead, smaller investment banks and seasoned SPAC sponsors are dominating the space.
“Unlike a few years ago, bulge bracket banks are less involved. Specialised players and smaller firms dominate both SPAC IPOs and de-SPAC transactions, which are now typically more modest in size,” he adds.
De-SPAC transactions are those where a SPAC company and a target company merge together.
Part of the resurgence is also linked to the sluggish IPO market.
“At the beginning of the year, we were gearing up for a robust IPO market, which we still hope will proceed,” says Best.
“SPACs remain an option even when IPOs are slow, and we've seen a modest resurgence compared to last year.”
Regulatory curveball
Asked what factors contributed to a slowdown of the US SPAC activity in the first place, Best highlights the new rules proposed by the Securities and Exchange Commission (SEC) as one of the reasons.
“The earlier slowdown was driven by new SEC regulations and increased liability, which caused many major banks to pull back,” he explains.
In 2024, the SEC reshaped the legal framework, affecting both SPAC IPOs and de-SPAC transactions.
New rules focusing on investors’ protection required enhanced disclosures about conflicts of interest, SPAC sponsor compensation, dilutions and other crucial information relevant to investors during the SPAC IPOs and de-SPAC transactions.
“The SEC also proposed that the underwriters in the IPO could have liability for the de-SPAC transaction even if they weren't involved in it. This led many big banks to exit the market, as potential legal exposure outweighed their SPAC-related profits,” adds Best.
The SEC also asked registrants to provide sufficient information to investors on the target company, so they could make informed investment decisions.
“There had been litigation and underperformance in some de-SPACs, with a few targets ending up in bankruptcy,” he recalls. “This led many to question whether to participate.”
For context, Best explains that one reason de-SPACs became popular was that, unlike traditional IPOs, they allowed companies – often start-ups with little or no revenue, but with high-growth plans – to share financial projections, which helped boost valuations.
“This was due to a regulatory loophole,” he says. “However, the SEC grew concerned about overly optimistic forecasts and changed the rules, removing certain legal protections under the Private Securities Litigation Reform Act (PSLRA) of 1995.”
The PSLRA introduced the so-called “safe harbour” provisions for forward-looking statements, shielding companies from liability as long as they included meaningful cautionary language and showed they had considered potential risks that could hinder their projections.
“These ‘safe harbours’ don’t apply to IPOs and, after the SEC rule changes in 2024, to de-SPAC transactions,” adds Best.
When the proposed rules were first unveiled, market participants needed to get acquainted with the proposed regulatory changes and understand how it impacted them. It was a period of adjustment.
“Despite setbacks, SPACs still have a role,” notes Best. “Even during the downturn, some deals were completed.”
But what has changed is the type of sponsors these transactions attract today.
Best explained that the 2021 SPACs frenzy appealed even to inexperienced sponsors, such as celebrities and other high-net worth individuals.
“But much of that has now shaken out,” he argues.
“Today, SPACs are mainly driven by experienced sponsors – ‘serial SPAC folks’ often on their seventh, eighth, or nineth deal – who know what they’re doing.”
Eyeing growth
For Willkie, the SPAC revival is only one part of a broader growth opportunity the firm sees across its capital markets and financial services practice areas.
Best notes the firm is growing significantly in Texas.
“While it’s long been the heart of the US oil and gas industry, it’s also rapidly emerging as a major financial hub,” he says.
“There’s even an exchange in Texas now, with another one planned.”
The firm is also capitalising on the rise of private credit. “Private credit is a major growth area. It’s a natural extension of our private equity practice, and there’s opportunity in fund formation, deal execution and workouts,” he added.
Willkie has nearly doubled in size over the past decade, growing in regions including Chicago, California, Texas and Germany.
“Capital markets is a key focus. While we already had a strong team, we’ve recently brought in new talent to accelerate growth – and we aren’t done yet,” Best concludes.
