WEBVTT
00:00:00.080 --> 00:00:02.240
Mike Blankeship here with the SPAC podcast today.
00:00:02.319 --> 00:00:06.639
I'm joined by with by Robert Brown and Ari Brown from ClearThink Capital.
00:00:07.919 --> 00:00:10.160
Guys, why don't you just give a quick introduction?
00:00:10.240 --> 00:00:11.519
Maybe start with you, Robert.
00:00:12.080 --> 00:00:12.320
Sure.
00:00:12.480 --> 00:00:13.759
My name is Bob Brown.
00:00:13.839 --> 00:00:16.719
I'm the CEO and managing director of ClearThink Capital.
00:00:16.879 --> 00:00:23.359
We're a transactional transactional and strategic advisory firm with a focus on, among other things, SPACs.
00:00:25.280 --> 00:00:25.839
Excellent.
00:00:26.000 --> 00:00:29.039
So, you know, I know you guys just released your first SPAC.
00:00:29.280 --> 00:00:39.520
So what was it like working for that first SPAC and how are SPACs now different than they were several years ago?
00:00:40.960 --> 00:00:41.840
Do you want me?
00:00:42.159 --> 00:00:43.359
I'll take it from you, Bob.
00:00:43.439 --> 00:00:43.679
Go ahead.
00:00:43.920 --> 00:00:44.719
Okay, sure.
00:00:45.280 --> 00:00:49.119
You know, it honestly it was it was a relatively smooth process for us.
00:00:49.280 --> 00:00:51.920
We have obviously we have a lot of experience with SPACs.
00:00:52.399 --> 00:00:59.759
Um as far as doing it as a principal for the first time, it was it was very different doing it as principal.
00:00:59.920 --> 00:01:10.560
Uh a lot of different concerns, a lot of uh a lot of time spent making sure that that uh sponsor investors understand the mechanics and so forth.
00:01:10.719 --> 00:01:20.000
Uh but as far as the the differences between our spec and and spacks we've seen historically, you know, we've been able to keep the expenses very, very low.
00:01:20.239 --> 00:01:26.480
So we had a great partner in DBRL that kept the underwriting discount very low with no back end.
00:01:26.640 --> 00:01:37.760
Uh great partners with council and others who were willing to work with us to keep those expenses down, with the the real goal of making the SPAC as attractive as possible on the back end.
00:01:38.640 --> 00:01:39.040
Yeah.
00:01:40.239 --> 00:01:56.480
To add to that, and this is this is Ari Brown, you know, before we formed the SPAC, we really looked and said, you know, what are the issues that cause SPACs to be unable to close deals or for deals to perform poorly post-close?
00:01:56.640 --> 00:01:59.359
And the goal with the SPAC was to structure around that.
00:01:59.680 --> 00:02:07.680
So one of the biggest things was the high SPAC-side fees that many SPACs have on the close of a transaction, regardless of redemptions.
00:02:07.920 --> 00:02:15.199
So, like Bob said, we we you know have great professionals we're working with who have uh been very reasonable with their fees.
00:02:15.520 --> 00:02:18.879
And we brought a lot of the other services um in-house.
00:02:19.039 --> 00:02:23.280
So we plan to do the MA banking and advisory work in-house.
00:02:23.520 --> 00:02:31.599
Um, as Bob, he hasn't gotten into his background yet, but as he was a securities and MA attorney for 25 years, he can do a lot of the preliminary legal work.
00:02:31.759 --> 00:02:34.159
Um, we have diligence teams in-house as well.
00:02:34.400 --> 00:02:41.439
So for us on the close of our transaction, we expect our SPAC side fees to be sub-2 million dollars.
00:02:41.840 --> 00:02:50.960
When in many cases you have, you know, between deferred underwriters' fees, council, um, MA, bankers' fees, you know,$10 to$15 million of fees.
00:02:52.719 --> 00:03:02.479
So all right, what you know, talking about sponsors, what can sponsors do to improve sort of the SPAC's performance as they're looking for targets or or just in general?
00:03:04.000 --> 00:03:09.520
Yeah, I mean, you know, I think uh there are two sides to it.
00:03:09.599 --> 00:03:16.639
You know, on one on one hand, I think a lot of sponsors fail because they look for the perfect deal.
00:03:16.879 --> 00:03:18.719
And there is no perfect company.
00:03:18.800 --> 00:03:20.560
You know, perfect doesn't exist.
00:03:20.719 --> 00:03:26.879
You have to find a very solid company that that you know has strong fundamentals and will perform over time.
00:03:27.360 --> 00:03:43.680
Um the the other side to that is you don't want to um merge with something that's so overvalued that um you know, so so early and overvalued that it's going to tank post-close and it's going to be difficult to meet whatever that cash requirement is.
00:03:45.439 --> 00:03:53.039
And Bob, what when you look at ClearThink, you know, one acquisition corp, uh how are you distinguishing that?
00:03:53.199 --> 00:03:55.599
I mean, there's 200 spacks out there.
00:03:55.840 --> 00:03:57.599
How do you distinguish yourself?
00:03:57.759 --> 00:04:00.400
You know, what is your target that you're looking for?
00:04:00.560 --> 00:04:04.560
What's what's the ideal um target for your for your spec?
00:04:05.120 --> 00:04:05.680
Sure.
00:04:05.919 --> 00:04:08.159
I I don't know that there's necessarily an ideal target.
00:04:08.240 --> 00:04:18.560
I would say reasonable value, reasonable requirements as to cash on the back end, uh a solid business, very solid management.
00:04:18.800 --> 00:04:29.279
You know, we're fortunate in that as part of the ordinary course of our business, we're approached by a reasonably large number of companies looking to explore a SPAC merger.
00:04:29.680 --> 00:04:48.160
So we've had the the great benefit of just even over the last several months, reviewing dozens and dozens of companies that that really could qualify and then pick trying to pick as close as possible to what would be an ideal target and uh and working with them going forward.
00:04:49.759 --> 00:05:04.480
Yeah, and so Ari, you guys have worked on a bunch of other SPAC deals, not your as a principal, but what are some of the most complex ones you've been part of and and how did you maximize that's the SPAC success for that or advising on that?
00:05:05.199 --> 00:05:05.519
Sure.
00:05:05.600 --> 00:05:10.480
I I'll let Bob address that because I know which which transaction he's gonna refer to.
00:05:10.959 --> 00:05:24.240
So we worked on a transaction where we took a public company in Australia, uh, took it out of the Australia Stock Exchange and out of the jurisdiction of the Australia Securities Commission and merged it with a SPAC here.
00:05:24.639 --> 00:05:31.680
Uh it was literally among the transactions I've done over my entire career, maybe the most complex transaction.
00:05:32.000 --> 00:05:42.480
Um, we had to use a double-dummy structure where you had regulatory regimes that that were applicable in the US, Australia, Israel, Ireland, and several other jurisdictions.
00:05:42.959 --> 00:05:49.839
But uh completed completed the transaction, and you know, it's it's sort of a case where you look and you say, How do you eat an elephant?
00:05:50.000 --> 00:05:51.600
It's one bite at a time.
00:05:51.920 --> 00:05:58.319
So you sort of work your way through each of these issues and each of the steps and put together a solid deal.
00:05:58.959 --> 00:06:06.399
Yeah, and speaking of like non-US VAC deals versus US, I mean, do you see some of the complications coming into the United States?
00:06:06.480 --> 00:06:11.600
And maybe talk about it from a perspective of looking at from you know regulatory.
00:06:11.680 --> 00:06:12.959
So the SEC's changed, right?
00:06:13.040 --> 00:06:14.079
We have a new administration.
00:06:14.240 --> 00:06:16.800
So how do you see that right now?
00:06:18.160 --> 00:06:24.720
Well, certainly the the administration is far more receptive to SPACs and sort of non-conventional finance.
00:06:25.279 --> 00:06:33.600
Uh there are jurisdictions that I think the the administration is more lenient towards and those that they're more more stringent towards.
00:06:33.920 --> 00:06:51.759
So I mean, looking at Europe, looking at Israel, looking at at Singapore, uh, number of other jurisdictions, I think that there's a not only a willing uh receptivity at the SEC to entertain these transactions, but also in the capital markets.
00:06:51.839 --> 00:06:58.160
Uh, when you start to look at some of the other jurisdictions, whether that's that's China or otherwise, it's become more difficult.
00:06:58.480 --> 00:07:05.600
So we've really tried to limit our search to those jurisdictions where we think we'll we'll have the most receptivity.
00:07:07.279 --> 00:07:11.680
Yeah, I I think I know what you're talking about when you say there are certain ones they don't want to go.
00:07:11.839 --> 00:07:13.279
What about the stock exchanges?
00:07:13.360 --> 00:07:16.240
What are you seeing there versus you know NASDAQ versus NYC?
00:07:17.519 --> 00:07:32.480
You know, we haven't done we haven't done a lot with the New York Stock Exchange on on this current generation of SPACs yet, but certainly from the standpoint of seeing other transactions coming to market, there there seems to be receptivity from Nasdaq and the New York Stock Exchange.
00:07:32.560 --> 00:07:38.560
Uh, we do have some international transactions that we're entertaining currently, so I I guess we'll find out soon.
00:07:39.199 --> 00:07:44.480
Yeah, we definitely have seen some people um you know have opinions one way or the other.
00:07:44.720 --> 00:07:52.319
Um, you know, some people view New York Stock Exchange as as you know more prestigious or NASDAQ is more prestigious.
00:07:52.639 --> 00:08:00.800
We found that most of that is just based on you know personal personal opinion than than real factor data.
00:08:01.040 --> 00:08:04.480
Um yeah, we haven't seen seen much of a difference.
00:08:06.079 --> 00:08:14.560
So let's um let's Bob, let's go back to ClearThink and working with operating companies, you know, well before you talked about the non- you know, non-US but and US.
00:08:14.959 --> 00:08:22.240
What are some of the common readiness gaps that you see as you're you know working with these private companies looking to go public?
00:08:22.879 --> 00:08:23.439
Sure.
00:08:23.680 --> 00:08:31.759
Uh obviously audit is the biggest issue in that there number one, you have different different gaps around the world if they're audited at all.
00:08:32.080 --> 00:08:36.879
And even if they are audited, most of those audits don't meet PCAOB requirements.
00:08:37.039 --> 00:08:41.600
So they require some degree of in your best case scenario, additional fieldwork.
00:08:41.679 --> 00:08:44.559
Uh, in your worst case scenario, complete re-audit.
00:08:44.720 --> 00:08:46.720
So that's that's been the biggest issue.
00:08:46.879 --> 00:09:07.360
But also from a corporate structure standpoint, uh, we find certain jurisdictions tend to be more, let's say, personality-based in their management, and that you tend, even with large companies, to have a handful of people who are often related, who tend to manage everything with very little outside supervision.
00:09:07.519 --> 00:09:18.240
So building that board, building the controls, uh, assisting them and putting everything in place can be really some of the most time-consuming aspects of our diligence process.
00:09:19.200 --> 00:09:19.679
Yeah.
00:09:19.919 --> 00:09:22.320
I mean, the the gap is sometimes tough.
00:09:22.480 --> 00:09:25.039
Private companies just don't aren't as organized and get it.
00:09:25.279 --> 00:09:36.879
You know, if you go back in time and you were to talk talk to yourself six months ago before you did your own SPAC, what are there any advice that you would give yourself uh kind of going forward, even though you've been in the SPAC game for a while?
00:09:37.519 --> 00:09:39.279
I I would just say be patient.
00:09:39.440 --> 00:09:42.000
You know, things always take longer than you think.
00:09:42.240 --> 00:09:48.240
Uh whether it's whether it's the banking or the drafting or whatever it happens to be.
00:09:48.480 --> 00:09:55.120
You know, I think we were very fortunate to have a strong team and everyone gave really strong efforts to get everything done.
00:09:55.279 --> 00:09:58.000
But everything takes longer than you think it's going to take.
00:09:58.159 --> 00:10:13.919
And I would say from our standpoint, that was the number one feedback that I got from the outside sponsors that we brought in, is sort of an understanding gap as to how long it takes to really draft something, how long it takes to go through an audit, even with a new company.
00:10:14.559 --> 00:10:17.919
So I would just say to be patient.
00:10:18.960 --> 00:10:22.240
Yeah, and Ari, what about yourself working with it?
00:10:22.799 --> 00:10:23.519
Yeah, I agree.
00:10:23.600 --> 00:10:38.639
You know, we had um mid-uh mid-process, uh, a government shutdown that caused, um, I think it was um, Bob, you can correct me if I'm wrong, but it's 70 days from when we filed our S1 to when we heard back.
00:10:39.279 --> 00:10:44.879
So uh, you know, you don't expect things like that, but uh just just expect the unexpected.
00:10:46.480 --> 00:10:55.600
Yeah, just so you know, or you might be seeing is that uh the SEC is now no reviewing, so I've done at least half a dozen now where they're just not even reviewing the S1.
00:10:55.840 --> 00:11:00.639
So it's a different different market because the government was shut down for 43 days.
00:11:00.960 --> 00:11:07.279
And if you filed on that September 30th date, um, you know, you were you were gonna be waiting.
00:11:07.519 --> 00:11:08.559
So I get it.
00:11:09.039 --> 00:11:09.679
That's tough.
00:11:09.759 --> 00:11:29.519
So was there anything else, you know, you would you know, piece of advice you would get somebody that may be a sponsor or a player in player in the ecosystem, um, that you know, you guys given the advisory work you do on the back end, but also now on the front end you've done it, you know, what what other piece of advice?
00:11:29.600 --> 00:11:36.320
I get this, you know, be patient, but is there anything else like I'm a sponsor, I want to raise money, I want to get this back done.
00:11:36.399 --> 00:11:38.399
What what would you uh tell them?
00:11:38.799 --> 00:11:44.720
Uh I would tell them differentiate yourself and try to put together as high a quality deal as possible.
00:11:44.960 --> 00:11:47.600
That people tend to get deal dementia.
00:11:48.000 --> 00:12:07.120
So the value suddenly doesn't matter so much, the structure doesn't matter so much, they tend to sort of wander further and further away from the point where a deal would be uh an easy deal to get done and and frankly, market acceptable.
00:12:07.679 --> 00:12:19.679
So you know, you we've all seen transactions that come out and and they're just overvalued or they're structured poorly, or that frankly the back end is structured in such a way that there's tremendous downward pressure on the stock.
00:12:20.000 --> 00:12:31.360
So to to differentiate yourself, to try to to uh put together really a high quality uh transaction, uh would be the advice that I'd give to anyone who's going out.
00:12:34.159 --> 00:12:45.200
I would say, you know, build build a strong team and you know, a strong team should have uh you know one expertise in whatever sector you're focused on.
00:12:45.600 --> 00:13:08.159
Um if you have a specific sector focus, you know, two people who have experience um experience executing transactions, um you know, people who have spAC experience, um, and and people who really are going to go, you know, get in the weeds and and do the work that that has to be done.
00:13:08.320 --> 00:13:12.080
Um the other thing I would say is you know keep a good cadence.
00:13:12.720 --> 00:13:20.320
So it can feel uh at the start like you have plenty of time, but very quickly it feels like you have no time at all.
00:13:20.480 --> 00:13:28.960
So, you know, move move as quickly as possible, talk to all your targets as quickly as possible and narrow down and move forward as quickly as possible.
00:13:30.159 --> 00:13:30.559
Great.
00:13:30.799 --> 00:13:32.559
Well, that's certainly good advice.
00:13:32.720 --> 00:13:36.240
Um well, I appreciate you coming in and speaking with me.
00:13:36.480 --> 00:13:39.759
Um, you know, it's uh a lot in the SPAC market now.
00:13:39.840 --> 00:13:46.000
We see a lot of activity and and congratulations again on on the success of uh your SPAC IPO.
00:13:46.080 --> 00:13:51.519
And you know, hopefully you find that uh near perfect target uh as you're going through.
00:13:51.679 --> 00:13:54.000
So again, thanks again, Bob and Mari.
00:13:54.720 --> 00:13:56.399
Thank you, thank you, Mike, for having us on.
00:13:57.120 --> 00:13:59.279
This is Mike with the SPAC podcast.
