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We have liftoff: Space-related M&A hits near record levels

Planet Labs [NYSE:PL], whose nearly 200 satellites take a daily scan of Earth’s entire landmass, started trading as a public company last month after last July’s USD 2.6bn merger with blank check company dMY Technology Group IV. The San Francisco-based space startup says it could continue using mergers and acquisitions to strengthen existing markets, branch into new ones or add analytics capabilities.  

Several other space startups are on a similar trajectory – going public through a blank check merger before using their new currency to land deals.

That trend ensured M&A in the North American space sector really blasted off in 2021, when deals worth USD 21.4 bn crushed the previous year’s USD 5.1 bn.  Blank check companies – or special purpose acquisition companies (SPACs) – were a major propellant. They accounted for seven deals worth USD 15.6 bn in 2021. The biggest involved Rocket Lab [NASDAQ:RKLB], whose nearly USD 5bn merger beat the two space-focused SPAC deals of 2019 and 2020 combined. Others included Virgin Orbit’s [NASDAQ:VORB] USD 2.87bn transaction, Astra Space’s [NASDAQ:ASTI] USD 2.47bn transaction, and Spire Global’s [NYSE:SPIR] USD 1.18bn deal.

Rocket boosters

What has put the rocket under deal makers? First, launch costs have plunged tenfold from a decade ago, leading to a tripling in the number of satellites over the same timeframe. That opened space up to all sorts of companies and ideas – ranging from agriculture to insurance to construction. Second, NASA expects to expand its reliance on commercial space companies into new areas. They range from removing space debris, establishing people landers and low earth orbit (LEO) space stations, to refueling or manufacturing in space.

A glimpse of the future

Nearly 20 SPACs, which typically have 18-to-24 months from their formation to find a target, continue orbiting space startups. They include C5 Acquisition Corp [NYSE:CXAC], TG Venture Acquisition Corp [NASDAQ:TGVC], and Space Acquisition Corp 1.

The sector could also see continued industry consolidation on the horizon as the main participants acquire technologies. That is already playing out with some of last year’s space-focused SPAC-class: After making their public debuts, Rocket Lab acquired Advanced Solutions, Planetary Systems and SolAero, Spire Global landed exactEarth, and Redwire [NYSE:RDW] bought TechShot. In the month before it went public, Planet Labs captured Netherlands-based analytics company VanderSat. Going forward, Planet Labs believes M&A is “a potential accelerant” to scale existing markets such as agriculture, defense and civil government, and expand into new markets such as forestry, energy and insurance.

If 2021 gave the industry its liftoff, 2022 could be the year M&A goes to the stratosphere.