GS Acquisition Holdings Corp. II (GSAH.U), filed for a $700 million IPO yesterday evening as a follow up to their first SPAC, which combined with Vertiv Holdings Co. (VRT).  Vertiv was a successful combination and currently trading around $13.95, so can this team repeat their prior success? There are a few key differences.

GSAH 2, will once again include Raanan Agus, on the team. Mr. Agus, who currently serves as global co-head and co-chief investment officer of the Alternative Investments & Manager Selection (AIMS) Group in the Consumer and Investment Management Division (CIMD) of Goldman Sachs, previously was a Director on GSAH 1.  However, now he’s in the Captain’s chair, as Chairman of the Board for GSAH 2.  Joining him will be Tom Knott, as CEO, CFO and Secretary.  Mr. Knott is the head of the Permanent Capital Strategies (PCS) Group in the Consumer and Investment Management Division (CIMD) of Goldman Sachs, where he’s held those titles since March 2018. Furthermore, Mr. Knott led Goldman Sachs’ co-sponsorship of GSAH I from its initial public offering in June 2018 to its merger with Vertiv in February 2020. So clearly these two have some SPAC experience, which is always an added bonus to any SPAC. As of yet, there are no other team members, but presumably, those will be added later.

However, they are currently missing an anchor industry executive, such as David Cote, who was an integral part of the first GS Acquisition Holdings.  However, not adding that component appears to be by design.  Per the prospectus:

“As demonstrated in GSAH I’s merger with Vertiv, the experience and operating capabilities of an executive partner can be an important component for a successful business combination in certain situations. We intend to recruit an executive who has the specific operating capabilities and experience needed by the target of the initial business combination to replace Mr. Knott and Mr. Agus. At this time, we believe retaining the flexibility to match the executive partner with the right capabilities and experience to the eventual, specific target company allows us to evaluate opportunities and situations across the broadest range of sectors and will enable us to deliver the best initial business combination for our Investors.”

So it sounds like this team will do the leg work of finding an acquisition, but will recruit an executive to be a part of any new public company.  Adding a well-known and seasoned executive is generally very favorable for any combination, and presumably, Goldman will have access to some high quality executives.

As for the structure, this is a $700 million, 24 months, 1/3 warrant deal, which is keeping in line with other deals of similar stature.  However, GSAH 2, specifically calls out that they intend to vest their founder shares for the intended combination:

“In addition, at the time of our initial business combination, we expect our sponsor to agree to vesting or other terms relating to our founder shares that it believes best align our sponsor’s objectives with that of our post-initial business combination stockholders. For example, in connection with initial business combinations, sponsors of other blank check companies have, in the recent past, subjected a certain number of their founder shares to vesting conditions based on the stock price of the blank check companies’ public stock, which our sponsor may elect to pursue if they believe it will help effectuate a business combination, although our sponsor has no obligation or other duty to do so.”

In theory, vesting the founder shares is great and frankly, all SPACs should have at least a portion of the founder shares aligned with the combined company.  And I fully am on board with intention. The problem for investors will be the last highlighted part, “….although our sponsor has no obligation or other duty to do so.”  Without a commitment to vest, investors will view it as a toothless tiger.  However, this deal doesn’t need it to sell.  Mr. Agus and Mr. Knott were involved in the first SPAC, which has a prior successful SPAC transaction under its belt.  And then there is the Goldman name and all of the deal-sourcing resources behind that institution.  This SPAC will sell on that alone.  Having said that, if they deliver a GSAH 2 deal with a strong vesting schedule for their founder shares, they have a data point to talk to when they launch GSAH 3.

In the meantime, we have another BIG sized SPAC coming to market, so look for GSAH 2 to price ahead of the July 4th holiday.

Summary of terms below: