How can we stimulate but also efficiently channel financial resources to profitable economic activities? In this regard, I would like to devote a brief discussion to a very interesting investment instrument that has been active in the U.S. market for some time now, but, perhaps, that is still in the twilight in the European market. I'm referring to the SPAC, which stands for Special Purpose Acquisition Company. This is a mode of investment similar to classic private equity, but much more flexible and, for this very reason, it is gaining momentum in the States. Despite being a tool that has been around for a few years, the European market, is still proving lukewarm to this mode of investment.

1. Andrea Mennillo
SPAC: veterans in the States, novices in Europe?
Article
17th
October, 2022
www.andreamennillo.org

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The recently concluded Ambrosetti Forum in Cernobbio once again brought the major
issues of the moment, from the complexities of the geopolitical chessboard and fears of
economic stagflation to risks and solutions for the future, to the attention of an
international audience.
I am convinced that, in a context that has never been as complicated as it is today, the role
of investment will remain a cornerstone. The question is always the same: how can we
stimulate but also efficiently channel financial resources to profitable economic activities?
In this regard, I would like to devote a brief discussion to a very interesting investment
instrument that has been active in the U.S. market for some time now, but, perhaps, that is
still in the twilight in the European market. I'm referring to the SPAC, which stands for
Special Purpose Acquisition Company. This is a mode of investment similar to classic
private equity, but much more flexible and, for this very reason, it is gaining momentum in
the States.
Despite being a tool that has been around for a few years, the European market, is still
proving lukewarm to this mode of investment. This is not only proven by the figures, which
are markedly undersized in Italy and Europe compared with the U.S., but also by the
attention given to SPACs. Although they have existed since 2005 and arrived in Italy in
2011, they have never been the focus of financial debate.
It is hard to say what the coldness toward SPACs is due to. It is an instrument that offers
several advantages, in the face of the risks typical of any investment in high-growth-
potential and highly information asymmetrical realities. It should be mentioned that the
only elements capable of determining the degree of risk of the operation undertaken
through the SPAC are, on the one hand, the expertise of the investment promoters and, on
the other hand, the strength of the bond of trust with the promoting partners, who are
called upon to be credible and responsible figures, especially in the choice of the target
company. Not surprisingly, the promoter is often an individual professional with extensive
experience and an excellent reputation in the market.
SPAC is a vehicle that aims to aggregate investors to make investments in one or more
target companies. There are four steps in the process: the establishment of the SPAC based
on a project proposed by the promoter(s), the conduct of the IPO to raise capital, the
search for the target company, and finally the actual investment transaction. The last step
may not even take place if there is no longer the necessary consensus among the partners or
there are problems with the target company. Once again, we see how it is crucial to rely on
authority figures in this area who can operate wisely and as profitably as possible.

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Perhaps Europe and Italy are not yet ready to make this leap, but the path is certainly the
one already traced by the United States, where 50 percent of IPOs involve SPACs. A very
large figure that demonstrates the potential scope of the phenomenon for the Old
Continent as well.
At the moment we are in, with a war on Europe's doorstep, the price of energy
commodities virtually out of control and economic growth that has become a major
question mark, SPAC represents an arrow a plus that it is good not to leave unused.
Once again, the experience of the States can come to our aid and can be an example for the
European context, not forgetting, however, that it is always skills and confidence that make
the difference. Moreover, trust cannot go without a good reputation, substantiated by
concrete actions.
Andrea Mennillo
Founder and Managing Director, International Development Advisory
Chairman Fordham University London Centre Advisory Board