On April 2, 2021 Geoff Meyerson co-founded Locust Walk, a Boston-based life sciences consulting firm, on Sept. 15, 2008, the same day that Lehman Brothers filed for bankruptcy and Merrill Lynch sold itself to Bank of America (Press release, Locust Walk Partners, APR 2, 2021, View Source [SID1234577553]). Meyerson said he "figured the world didn’t need another investment bank," so he and his team found other ways to support biotech firms: advising on strategy, providing analytics, helping raise capital and preparing them for IPOs.
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Late last year, when the popularity of special-purpose acquisition companies, or SPACs, was exploding, Locust Walk was ready to jump in on the action. The firm filed to raise $130 million for Locust Walk Acquisition Corp., its first SPAC, in the fall. By mid-January, Locust Walk had secured $175 million for the vehicle and gone public on the Nasdaq.
Now, Locust Walk is using the same expertise it has developed over the last 12 years as it seeks a target for the SPAC.
"We basically used our engine that we built at Locust Walk to screen for the right types of companies, identify them, do due diligence and secure a deal," Meyerson said. "We’re kind of eating our own cooking."
Locust Walk is part of a rapidly growing group of companies and investment firms looking to strike gold via SPACs. RA Capital, MPM Capital, General Catalyst, Bain Capital Life Sciences and Omega Funds all launched SPACs of their own within the last year.
Also called blank-check companies, SPACs are formed with the purpose of using the proceeds from their initial public offerings to acquire one or more unspecified businesses, referred to as targets. SPACs have found a sweet spot in the Covid-19 era, offering a seemingly easier route to becoming a public company than a traditional IPO.
‘Not going anywhere’
Meyerson noted that even large, well-funded biotech firms are eyeing SPACs as a means to go public.
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"I think the biggest surprise we’ve had is we thought (those interested in SPACs) might be second-tier companies. We didn’t think some of the biggest companies would want to do that," Meyerson said. "We found that not to be the case. There are a lot of top-tier companies with plenty of investors that are seriously considering SPACs or have already merged with SPACs."
Meyerson declined to share many details about the criteria Locust Walk has outlined for a target for its SPAC. He said his team is looking for a biotech company of some kind, predominantly focused in the U.S., with a "great management team" that has raised adequate funding to support Locust Walk Acquisition Corp.’s $175 million raise. It is that amount of capital, Meyerson thinks, that sets Locust Walk apart from other SPACs in this space. With the exception of General Catalyst and Arch Venture Partners’ recently filed $500 million SPAC, most local biotech-focused SPACs are priced at around $100 million.
Meyerson doesn’t think the SPAC era is likely to be long-lived, however. The market might see a SPAC slowdown soon, or traditional IPOs may make a comeback. "There’s no way this pace can be sustained," he said.
Whatever the case, Locust is "not going anywhere," he said.
"We’re continuing to build and grow the core business. This is just one tool we offer to companies, and now, we can become more full-service, helping companies navigate the SPAC landscape because we’ve been a buyer," Meyerson said. "If the SPAC business continues, we’d like to continue to be a part of it as a SPAC issuer, but fundamentally, our job is to help biotech grow."