SPACs in a Deal-Starved Market are Scrambling for Targets

Special Purpose Acquisition Companies or SPACs, got headline news with dramatic fanfare in the early 2020s as an alternative route to public markets, enabling private companies to list without the prolonged process of a traditional IPO. But now six years into the SPAC boom, and in the midst of broader macroeconomic and regulatory headwinds, many blank-check vehicles now find themselves deal-starved, pressured to find compelling targets as the clock is ticking and forcing them to rethink what constitutes a “suitable” acquisition.

The SPAC market’s past torrid pace, in which dozens of SPACs closed mergers yearly, has decelerated sharply. Investors and sponsors alike have grown cautious, filtering out weaker targets and focusing instead on businesses with established revenue, sustainable growth models and clear paths to profitability. This has created stiff competition among SPAC sponsors, particularly in sectors where capital is abundant and quality opportunities are scarce.

Across industries such as clean energy, biotech, artificial intelligence, fintech and autonomous systems, SPACs are now vying for fewer available targets. The early-stage wellness, consumer tech, and speculative blockchain clusters that once fueled SPAC volume have thinned, while larger, capital-efficient sectors command more scrutiny and higher valuation expectations. Biotech companies with real clinical data, SaaS businesses with predictable recurring revenue and energy transition developers with government contracts are among the more attractive targets, but they also command significant premiums, forcing SPAC sponsors to compete with strategic acquirers and private equity funds.

Amid this scarcity, some SPACs are broadening their playbooks, exploring cross-border targets and even considering innovation-driven assets that transcend traditional industrial boundaries. One of the emerging themes gaining attention is the use of digital asset–based financing instruments, particularly Digital Credit Notes (DCNs) and related tokenized products, which offer a new way to structure capital both before and after a merger.

DCNs are digitized credit instruments that function as asset-backed, yield-oriented notes on blockchain infrastructure, providing flexibility and transparency not available in traditional debt or equity structures. Unlike conventional convertible notes or PIPE financings, DCNs can be programmed with conditional cash flows, automated compliance and transferability across compliant digital markets. For cash-hungry SPAC targets, especially companies in biotech, industrial, defense tech and sustainable tech, DCNs offer a way to raise capital without immediately diluting existing shareholders or overextending the SPAC sponsor’s balance sheet.

Moreover, SPAC sponsors have begun to emphasize how DCNs and similar digital instruments can enhance post-merger capital strategies, including funding working capital, acquisitions or growth initiatives within the combined entity. Because DCNs can be structured with customizable coupon features, maturities, tranches, collateral profiles and be project based, they appeal to sophisticated investors seeking predictable yield alongside participation in long-term growth, an alignment closer to private credit than typical public equity holders.

The integration of digital asset products into SPAC deal structures also signals a broader shift in capital markets, the reimagining of how public companies finance strategic initiatives. In sectors such where innovation cycles move rapidly and traditional debt markets are less agile, SPACs that can deploy DCNs, tokenized revenue interests or hybrid equity-debt instruments may hold a competitive edge. This means deals close and close at a more rapid pace.

From the investor perspective, this trend suggests a more nuanced, multi-layered valuation framework for SPAC targets. Rather than assessing potential merger targets solely on revenue multiples, recurring revenue growth or EBITDA projections, investors are increasingly considering how a target leverages emerging financial technologies to manage capital, attract new investor bases and support future acquisitions. In doing so, SPACs may attract a broader class of long-term investors who see value in blockchain-enabled liquidity and efficiency, alongside traditional financial metrics.

But this approach is not without its challenges. Regulatory uncertainty around digital asset instruments varies by jurisdiction and integrating digital credit mechanisms into publicly traded entities requires robust governance, compliance frameworks and investor education. Nonetheless, the fact that DCNs and similar structures are receiving serious consideration in SPAC boardrooms, and occasionally being proposed as part of merger financing packages, is putting the spotlight on creative adaptation in a more competitive SPAC market.

In an environment where targets are fewer and expectations are higher, SPAC sponsors that innovate beyond traditional equity and debt offerings may unlock new pathways to value creation. As the SPAC model matures, the integration of digital asset financing could evolve from niche curiosity into a strategic differentiator, one that helps sponsors secure deals, align investor incentives and support the long-term growth of combined companies across industries as diverse as AI, biotech, renewable energy and digital infrastructure.

The SPAC market’s next chapter may therefore be defined not just by who they acquire, but how they finance those acquisitions and whether digital innovation becomes core to a new playbook that balances scarcity of targets with abundance of creative capital solutions.