This article appears courtesy of Institutional Investor
Source: Corporate Financing Week
Dan Shirai
Top Street investment banks are stepping into territory thus far dominated by the minnows: specified purpose acquisition vehicles, or SPACs, which are essentially blank check companies. Deutsche Bank this month signed onto two vehicles--both related to real estate investing, Lehman Brothers is widely quoted as preparing an offering and other firms such as Citigroup are considering employing variations on the structure.
SPACs are run by management teams who raise cash with institutional investors and then go out in search of an acquisition. The money is put in escrow and acquisitions are voted on by shareholders. "The structure [takes] the private equity guys out as mediators," said one executive, adding the vehicles allow for private equity-like returns because investors are betting on the ability of a management team to go out and generate profits in sectors in which they are experts.
Deutsche Bank set up a deal for Grubb & Ellis , the real estate company which will use the SPAC as its asset management and property acquisition arm.