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Nicole Neeman Brady

Sustainability SPAC Closes; Ends Quest to Acquire Green Businesses

July 14, 2023 by Joe Panettieri

Sustainable Development Acquisition Corp. (SDAC), a special purpose acquisition company (SPAC) has decided to dissolve and liquidate itself. The move ends SDAC's two-year effort to potentially acquire a privately held green business for as much as $1.2 billion.

To be clear, this isn't a bankruptcy. This is simply a case of a company forming to potentially make an acquisition, and then dissolving itself because a suitable acquisition never materialized.

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Indeed, Sustainable Development Acquisition Corp. was formed as a partnership between Renewable Resources Group (RRG) and Capricorn Investment Group in 2021. RRG Managing Director Nicole Neeman Brady (pictured, top of page) ran SDAC as CEO.

What Is A SPAC?: Also known as blank-check companies, SPACs are designed to raise funds via an IPO (initial public offering). Armed with that IPO money, the SPAC then seeks to acquire one or more privately held businesses.

SPAC activity was very strong in 2020 and early 2021 because they helped privately held companies to go public without facing many of the traditional IPO hurdles. But the SPAC business model cooled off in late 2021, as SPACs and investors realized that it was very difficult to find and acquire strong, privately held businesses at reasonable valuations. Rising interest rates further pressured SPACs in late 2022 and early 2023, since many privately held companies prefer to stay private until interest rates either plateau or begin to decline again.

Successful IPO Raised Over $300 Million

Sustainable Development Acquisition Corp. (SDAC) seemed to have a strong start. The SPAC pursued a $275 million IPO in February 2021. The goal was to acquire a business in the water, food & agriculture or renewable energy sectors. The target acquisition(s), SDAC said, would address the global challenges identified by the United Nations Sustainable Development Goals.

Demand for the SDAC IPO appeared strong. Instead of raising $275 million, the SCAC completed an upsized $316 million IPO.

The successful IPO positioned SDAC to potentially acquire a business for roughly $900 million to $1.2 billion, according to a basic financial formula that CEO Nicole Neeman Brady shared with Forbes in 2021. "When we look for a company to acquire, the simple rule of thumb is that the company target size is somewhere around three to four times how much you raise in the IPO," Neeman Brady told the magazine.

Describing SDAC's search for acquisition targets, Neeman Brady told Yahoo Finance in 2021: "We're going to be looking at a broad range of companies. But ideally, the company either is already a B Corp or we can set them on their path to be one."

Certified B Corporations are considered leaders in the the global movement for an inclusive, equitable, and regenerative economy, advocates note.

The hunt for potential acquisitions also included an experienced due diligence team, Brady said in that Yahoo Finance interview: "We have team -- a global team that includes hydrologists and agronomists, so we can really get down into the technical details and understand things. And I think that's a critical component of knowing whether a company really is just hype or if there's something [of value] underlying there."

SPAC Market Slowdown, M&A Deal Deadlines

Fast forward to 2023. Under SEC rules, blank-check companies usually have just two years to merge with a target company after listing, although it can be extended to three, Pitchbook notes. If the M&A deadline is missed, the rules require the SPAC to be liquidated. Such is the case at Sustainable Development Acquisition Corp., which is now liquidating itself.

Annual SPAC acquisitions and SPAC IPOs

SPAC Liquidations Explained

According to an SEC investor bulletin about SPACs, the liquidation process typically involves these steps:

  • IPO proceeds are held in the trust account until a SPAC consummates a business combination or liquidates. 
  • If the SPAC is liquidated, shareholders at the time of the liquidation will be entitled to their pro rata share of the aggregate amount then on deposit in the trust account.

And just to reiterate: This isn't a bankruptcy. This is simply a case of a company forming to potentially make an acquisition, and then dissolving itself because a suitable acquisition never materialized.

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