In late 2020 and early 2021, a wave of former restaurant industry executives and financiers created several special purpose acquisition companies, or SPACs, creating a potentially hotly competitive market for any restaurant chain looking for a buyer.
Nearly two years later, none of the SPACs created during that wave have found a target within the restaurant industry. With deadlines looming to find a target to acquire, these shell companies have either closed shop or they’ve found a target well outside their initial target range.
To wit: Just this week, Sizzle Acquisition Corp., a SPAC formed last year by &pizza cofounder Steve Salis, agreed to merge with Critical Metals, Europe’s first lithium mine.
And last week, Tastemaker Acquisition Corp. announced a deal to merge with Quality Gold, a Fairfield, Ohio-based jewelry distributor and logistics company.
Neither, of course, are restaurants or restaurant technology companies. But that was to be expected almost from the time when so many of these acquisition companies were formed. There are, after all, only so many restaurant chains willing and able to go public.
A SPAC is a shell company that takes money from public investors and uses it, preferably, to invest in a privately held company. The shell company takes on the name of the target business, thereby taking it public.
They went from a financial curiosity to the dominant form of IPO during the pandemic. In 2019, for instance, there were 59 SPAC initial public offerings. That increased to 248 in 2020, according to SPAC Analytics, and then 613 in 2021.
Only 82 blank-check companies have held IPOs this year, but they still represent more than three quarters of all IPOs, according to SPAC Analytics. That might be more a function of the frozen market for initial public offerings than of the popularity of SPACs.
SPACs generally have two years to find a target company, otherwise they must send money back to shareholders and dissolve. Most of the blank-check companies formed during that 2020-2021 SPAC rush are coming up on that two-year deadline.
Since then, the IPO market became too attractive for many restaurants to ignore, and companies often chose that route instead. And then the IPO market froze, leaving at least eight restaurant companies having done some of the work for an offering but without a market friendly enough to actually go public.
Meanwhile, the broader market for restaurant mergers and acquisitions remains generally slow, with restaurant companies wanting higher valuations than many buyers are willing to give. That makes for difficult dealmaking that is likely affecting the SPACs.
It’s only natural, then, that blank-check companies would expand their target industries to get a deal done. That’s frequently the case with SPACs.
But at least they got a deal done.
Fast Acquisition Corp., formed in 2020 by Ruby Tuesday founder Sandy Beall to take public a fast-food chain, ultimately reached a deal with Landry’s owner Tilman Fertitta to take his holdings public. Fertitta backed out of the deal, prompting a lawsuit, and then a settlement, and ultimately the breakup of the SPAC.
Ah, but a second Fast Acquisition SPAC did find a target in July in Falcon’s Beyond, an intellectual property development company.
That was the same month that USHG Acquisition Corp. and Panera Brands called off their combination SPAC merger and IPO. USHG, the SPAC created by restaurateur Danny Meyer, is still looking for a target.
Other SPACs are also looking for targets, including Bite Acquisition Corp., the SPAC featuring former Applebee’s and IHOP CEO Julia Stewart.
Others never got off the ground, notably Do It Again, the SPAC from former Sonic CEO Cliff Hudson, which withdrew a planned IPO earlier this year.
To be sure, the SPAC market can be difficult even in a more normal acquisition and IPO market. In 2019, for instance, Chuck E. Cheese parent company CEC Entertainment terminated a deal with SPAC Leo Holdings. The pandemic led to the end of the merger between SPAC Allegro Merger and TGI Fridays.
On the other hand, Opes Acquisition was able to complete a deal to take the chain BurgerFi public. BurgerFi’s stock price is down 80% since then.