Michael Dell’s New SPAC And IPO: 5 Big Things To Know

From who runs MSD Acquisition to the type of companies its targeting to buy, CRN breaks down the five biggest things to know about Michael Dell’s newly formed acquisition company.

5 Keys To MSD Acquisition

IT guru and billionaire Michael Dell is launching a special purpose acquisition company (SPAC), which has major M&A implications for the vast technology and media industry.

MSD Acquisition is a newly formed blank check company with the purpose of creating value for top-notch private companies by taking them into the public market.

CRN reviewed MSD Acquisition’s recent filing with the U.S. Securities and Exchange Commission to discover answers to some of the biggest questions surrounding the company, such as if it will compete against Michael Dell’s infrastructure giant Dell Technologies. CRN also addressees what types of businesses MSD Acquisition is looking to buy as well as who’s in charge of the new SPAC.

Here are the five biggest things to know about MSD Acquisition.

What type of companies will MSD Acquisition target?

MSD Acquisition said “now is a particularly attractive time to pursue a business combination” for various reasons including the number of new public listings in the U.S. being low.

The SPAC company is focused on buying companies in the technology and media markets. “While not limited to any sector, we expect our focus on high-growth companies will inevitably lead to opportunities in the technology and media sectors,” MSD Acquisition said.

MSD Acquisition said it will follow five specific guidelines when searching for companies to acquire including being market leader with a proven business model.

“We will seek to acquire a scaled, multibillion-dollar business with a leading market position in its industry. We intend to prioritize companies that operate in “winner takes all” or “winner takes most” industries,” said MSD Acquisition.

Other acquisition targeting guidelines include companies that have sustainable competitive advantages and large addressable markets along with runway for growth. “Our management team’s experience has taught us that differentiated businesses with sustainable competitive advantages or moats are best positioned to grow, withstand competition, maintain their unit economics, and create value over the long-term,” said the company.

The last two acquisition criteria’s are businesses with a “robust economic model with predictable, recurring revenue” and companies with a strong management team.

The firm said it has not selected or has had any “substantive discussions” with any business targets yet.

Will MSD Acquisition compete with Dell Technologies?

Michael Dell is the CEO, chairman and founder of Dell Technologies, the $92 billion market leader in storage, server and hyperconverged infrastructure as well as one of the world’s top PC vendors.

In its SEC filing, MSD Acquisition specifically says that it will not invest in any Dell Technologies’ principal markets.

“We do not intend to pursue an initial business combination with a company that is in a business directly related to any of the principal businesses in which Dell Technologies operates,” said the company.

MSD Acquisition is a “blank check” company, which raises funds for an IPO with the goal of buying a private business or multiple private businesses. The private entities will then become public with MSD Acquisition’s merger. “MSD Acquisition is a newly organized blank check company incorporated as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities,” said the company.

Who’s in charge?

Although MSD stands for Michael and Susan Dell, Michael Dell technically isn’t in charge of running MSD Acquisition. The management team consists of CEO Gregg Lemkau, CFO John Cardoso, and Chairman John Phelan – all three of which are top executives at Michael Dell’s family firms MSD Partners and MSD Capital which manage over $19 billion and employ around 110 people.

Lemkau was an investment banker at Goldman Sachs for over 28 years. His experience at Goldman Sachs included being co-head of its Investment Banking Division; Global Mergers & Acquisitions; and Media and Telecom Group. Lemkau’s experience in advising companies on scaling their business, accessing and deploying capital, transitioning from private to public markets, and growing via mergers and acquisitions, “will be invaluable in pursuing our initial business combination and making the company we combine with more successful,” said MSD Acquisition.

Phelan is a co-founding partner of MSD Capital and MSD Partners. During his 22 years, Phelan invested across asset classes and led the growth of $400 million of initial capital into over $19 billion in combined assets under management across MSD Partners and MSD Capital while generating billions of dollars of investment profits. Representative investments include Nginx, Palantir Technologies, Ultimate Fighting Championship, WIRB -- Copernicus Group, Owl Rock, Ring Container, and Hayward Holdings.

Prior to joining MSD Partners in 2017, Cardoso was a managing director and senior fund controller at Davidson Kempner Capital Management. He was also previously a director at Clearwater Capital Partners and a senior audit manager in the Alternatives Investment Management Practice of PricewaterhouseCoopers.

The company said it will leverage Michael Dell’s technology expertise and broad network of industry relationships, while his experience transitioning Dell Technologies from private to public “will differentiate” MSD Acquisition.

What role will Michael Dell’s family companies play?

Michael Dell formed MSD Capital in 1998, which manages capital for the Dell family, and MSD Partners in 1999. Both of Michael Dell’s family companies will play a significant role in supporting as well as being an affiliated of MSD Acquisition.

In a bold move, MSD Partners has already agreed to buy up to 5 million investment units at $10 each once the company closes on its initial merger deal.

“MSD Partners will provide MSD Acquisition with connectivity with a leading institutional investment platform with many years of experience in the marketplace and a culture focused on maximizing long-term value, the ability to source a large number, and a more differentiated set, of business combination opportunities, and the means to optimize our capital structure and raise incremental capital to support potential go-forward needs following a business combination,” said MSD Acquisition. “To support the business combination, [MSD Partners] is entering into a forward purchase agreement where it has agreed to purchase, in the aggregate and at its sole discretion, up to $50,000,000 of the forward purchase units.”

MSD Acquisition said the new company will benefit from MSD Partners’ extensive and broad investment experience, its proprietary relationship network and its reputation in the marketplace as a preferred partner.

Michael Dell is currently ranked No. 18 on Forbes magazine’s richest people in the world list with a net worth of $43.3 billion.

Upcoming IPO information

MSD Acquisition is looking to raise upwards of $575 million in its initial public offering this year.

The new SPAC is aiming to sell 50 million investment units at $10 each, with each including one Class A share and 0.2 warrants to purchase a second one at $11.50 in the future.

MSD Acquisition will apply to have its units listed on the Nasdaq under the symbol MSDAU.

“Once the securities comprising the units begin separate trading, we expect that the Class A ordinary shares and warrants will be listed on Nasdaq under the symbols “MSDA” and “MSDAW,” respectively. The units will automatically separate into their component parts and will not be traded following the completion of our initial business combination,” said the company.

Overall, MSD Acquisition said its acquisition and value creation strategy is “to identify, acquire — and after our initial business combination — serve as a trusted, long-term partner to accelerate a company’s growth in the public markets.”