As Lanvin prepares to go public, what boards considering SPACs should know

Lanvin Group announced on Wednesday that it will go public, planning to list on the New York Stock Exchange (under the symbol “LANV”) after its merger with special purpose acquisition (“SPAC”) firm Primavera Capital. Acquisition Corporation as part of a transition to raise up to $544 million and achieve a “pro forma enterprise value of $1.5 billion and a combined pro forma net worth of up to $1.9 billion “. In a statement, Lanvin Group, which renamed itself Fosun Fashion Group last fall, said that “through the business combination” it aims “to catalyze growth” both from an acquisition perspective and following a “growth in Europe, North America, and Asia.

News of the impending SPAC for the Lanvin Group, which has majority stakes in Sergio Rossi, Wolford, Caruso, St. John, and of course Lanvin, among other brands, stems from Perfect Corp revealing earlier this month that it will go public on the Nasdaq merging with Provident Acquisition Corp in a deal that is expected to value the New Taipei City-based startup, which provides software to beauty and fashion companies, at more than $1 billion. dollars. Prior to that, Zegna Group made its public debut in December by merging with Investindustrial Acquisition Corp., in a deal that yielded a $3.1 billion valuation.

Although SPACs are not a new way to raise capital, dating back to the 1990s, they have seen a marked increase in recent years. Last year, a “record” number of de-SPACing operations was carried out, increasing from 248 in 2020 (and a total of 83.3 billion dollars raised) to 613 in 2021. An alternative to the traditional process of ‘IPO’, which is a notoriously expensive and time-consuming transaction, merging with a SPAC has been seen as a faster, more efficient and more profitable way to go public for target companies, such as the Lanvin Group, Perfect Corp and the Zegna Group, among others.

“Despite the large number of SPACs competing for acquisition targets” in recent years, Akin Gump attorneys Kerry Berchem and Patricia Precel say that many SPACs – which are essentially shell companies seeking to merge with private companies with the intention of going public -” have been able to find targets and close their de-SPAC deals. Nonetheless, they claim that SPACs appear to be facing hurdles in 2022, which could serve to curb such growth year-over-year in terms of the number of SPAC transactions, because “there are still many SPACs competing for goals, including those with shorter time frames to complete a transaction, [and given that] the SEC may issue new rules governing SPACs aimed at preventing SPACs from escaping the investor protections associated with a traditional IPO.

Beyond that, there is the potential for litigation to interfere with such transactions. Not just a potential threat, the SPAC-centric litigation has materialized in what Paul Weiss previously described in a client memo as a “substantial number of lawsuits” that have been filed by SPAC shareholders, who “contest the terms of – or disclosures surrounding – SPAC’s merger transactions.

The increase in SPAC-related litigation has resulted in only one substantive decision, rendered by the Delaware Court of Chancery in January 2022 (In re Multiplan Corp. Shareholder Litigation), in which the court denied a motion to dismiss, thereby allowing the plaintiffs’ claims against the SPAC promoter and its directors that the defendants breached their fiduciary duties by failing to disclose vital information in connection of the merger of Churchill Capital Corp. III (PSPC) and Multiplan Inc. – to continue. Delaware’s entire fairness standard of review applies to a SPAC takedown transaction challenged on the basis of misrepresentations or omissions in the company’s proxy statement, court finds SPAC.

Reflecting on the potential impacts of the court ruling, Mayer Brown LLP partners John Ablan, Philip Brandes and Brian Massengill said in a memo for Harvard Law School’s Corporate Governance Forum that “although the Although the court’s opinion is only a denial of a motion to dismiss and not a final decision on the merits, this is an important development for PSPCs and PSPC sponsors, directors and officers,” nonetheless. Among other things, “the court’s findings point to a potential increased risk of litigation for SPAC directors in connection with business combination transactions. “A very common feature of SPACs”, they state that “the different incentives for shareholders Class A shareholders versus Class B shareholders may present an inherent conflict of interest requiring the application of the “full equity” standard to a de-SPAC business combination transaction.

As to whether such headwinds in the space will deter future deals, the recent trio of fashion deals, including the impending Lanvin SPAC, seem to suggest that more could still be to come even if the numbers are up. generally down this year. “Only 24 SPAC mergers worth $28.3 billion have been announced so far this year, compared to 93 deals worth $233 billion in the first quarter of 2021,” according to Reuters.

In light of “the scope of MultiPlan and the new application of traditional fiduciary duty principles in SPAC contexts,” boards that may be contemplating SPAC transactions can proceed with caution. According to Berchem and Precel, counsel would be well served to “monitor additional developments in the case, identify real and perceived conflicts in monitoring any SPAC-related transaction, pay close attention to disclosures and risk factors, and consider obtaining a fairness opinion from a financial advisor if there are any conflicts of interest among directors of a SPAC.

With regard to the Lanvin Group’s plans following its merger with SPAC, it seeks to boost the growth of its “uniquely positioned” brands in order to capture a greater share of the global luxury goods market, which , according to him, is expected to reach $430 billion by 2025. With a “strong base” in Europe, and “nearly half of [its] revenues currently derived from the EMEA region”, the Group seeks to place “a strategic focus on realizing the untapped potential of brands in Asia and North America, where its brands are at an inflection point to achieve rapid future growth. and meaningful”. Greater China accounted for just 14% of the group’s global revenue in 2021, while the North American market accounted for 33%, with more than half coming exclusively from Saint John.

Against this backdrop, and given its “unprecedented access to and track record of supporting and growing international consumer brands” in the rapidly growing Asian market, and given that its brands are “also beginning unlock the enormous growth potential of the North American market. market by opening new retail stores, expanding e-commerce channels and launching dedicated marketing and branding collaborations”, the Lanvin Group asserts that it is “well positioned to seize the enormous growth potential generated by the burgeoning demand for luxury goods on a global scale”.