Carlyle’s Lee on SPACs: Investing that money is not easy

Firms should take a step back and see how the SPAC phenomenon settles, says the alternatives giant's chief executive Kewsong Lee.

Carlyle Group’s chief executive says investors need to think more about putting capital from a special purpose acquisition company to work than simply raising money for such instruments.

“Raising the money for these SPACs, that’s kind of the easy part of the equation. The hard part is putting it to work,” Kewsong Lee said on the firm’s investor day presentation on Tuesday.

Lee added that a lot of attention has been focused on raising money for SPACs and that “people need to start focusing on ‘what does it mean to have that money and how do you actually deploy it’?”

Carlyle Investor Day - Kewsong Lee
Lee: Investing money and creating value is hard

He said: “Investing money is not easy. And to do it in a sustainable way over a long period of time is even harder.

“A lot of money is being raised in SPACs right now… and a lot of deals are getting consummated, so you can’t ignore it.”

SPACs are becoming a major force for taking privately held businesses public and more of these have been formed in 2020 than in the last several years combined. Data from SPAC Research show that 248 SPAC IPOs raised $83.4 billion last year. A total of $52.1 billion has been raised across 166 SPACs from January to date, representing about three being set up each day.

Among its peers, Apollo Global Management has launched at least two SPACs since September, as reported by sister title Buyouts. Its latest, Spartan Acquisition Corp II, aims to raise $400 million for an initial public offering. Blackstone made a partial exit of portfolio company Paysafe through a SPAC in December.

According to Lee, firms should take a step back and see how the SPAC phenomena settles.

“Some SPACs will do quite well. But there may be a lot of SPACs that are going to start to appreciate how hard it is invest wisely, and there may be a lot of disappointment. We are going to have to see over the course of time how this all plays out, because investing sustainably well is not that easy.”

Lee also noted that Carlyle is spending time thinking about SPACs and that many of its portfolio companies have explored the instruments as a viable path to liquidity.

“That’s obviously an interesting route for us and we will look at that case by case, by case,” Lee said.