About Martin Franklin
Martin Franklin, founder and executive chairman of Element Solutions and founder of Mariposa Capital, has been active in the special purpose acquisition company (SPAC) market. In November 2021, Franklin said he had filed two new SPACs, Brimstone Acquisitions and N2, and described the SPAC market as undergoing a "digestion period" with a "shakeout" ahead, predicting that fringe actors would eventually go away. He contrasted his approach with what he called the "story stocks" and "business plan opportunities" prevalent in the U.S. SPAC market, stating that he targets "very profitable businesses, market leaders in their markets, great management teams." Franklin also said that when buying a SPAC, investors are "really buying a two-year CD with equity upside" and that the real valuation occurs when a PIPE transaction is announced and reviewed by institutional investors.
Franklin has also commented on the broader IPO market and economy. In September 2020, he said the IPO market "lacks discipline," with "valuations beyond reasonable" and that "venture capital needs to have more discipline on its expectations and investment banks need to have more reality in how they present opportunities." Regarding the U.S. economy, Franklin said in September 2020 that he did not expect a recession in the short term but anticipated "lower growth." He has also discussed his role at Element Solutions, noting in September 2019 that the company was "very high cash flowing" and "the most under levered company I think I've been in for a very long time," and that he had personally invested over $20 million in the company's shares.
Source: AI-verified profile updated from Martin Franklin's recent appearances.
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Transcript (6 segments)
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Interviewer0:00
Martin, always good to see you. The last time we spoke, you did indicate that the SPAC market was getting frothy. Now you did make the point it was in the U.S., and I know this is UK-based, but it is still somewhat surprising to see you back in even when you did seem to have some reservations. Why?
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Martin Franklin0:19
Well, you know, I can't overemphasize what I do is very different from the U.S. SPAC model. So I'm not really looking for the same kind of opportunities. Mine are maybe a little more mundane. I'm trying to buy very profitable businesses, market leaders in their markets, great management teams, not necessarily story stocks and high growth, if you like, almost business plan opportunities. That's what's going on in this SPAC market in the U.S. today. And what I do is much more fundamental, so it's very different. It's much more like a private equity house would do or a corporate strategic. So, you know, I'm going to raise probably about 750 million dollars, maybe more, through Harvester. It'll be in partnership with Viking Global, who I think will be our largest investors in J2, which was the company that bought API Group. API put out earnings this morning. The business is doing tremendously well. Stock's up somewhere between 40 and 50 since we started. So we're very happy with the trajectory of that business, very well-run business, and really the same kind of thing that I hope to do with Harvester.
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Interviewer1:35
Martin, there are differences between the so-called rules for SPACs in the UK and the U.S. Simply put, I think in the UK, holders have fewer rights, don't they, which may be an advantage to you but perhaps a disadvantage to them.
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Martin Franklin1:52
Well, it's actually an advantage to the investor because if you want to buy quality companies, telling somebody you want to buy their business for two or three billion dollars but you have to run around to maybe get the vote, perhaps you have the money and perhaps you don't, that's not—I call that flow capitalism, not to be too harsh on it. But at the end of the day, you either have the money to buy something or you don't. And when you go into serious conversations with companies that have choices, having that uncertainty is a gating item. And in my opinion, that has actually driven U.S. SPACs sometimes to do deals that I would call suboptimal. I know this from experience. The first three SPACs I've deployed, I think eight billion dollars or so of equity in different vehicles over the last decade, who were really the pioneers of what became the more institutionalized scale SPAC business. But when you can't deliver certainty, there is an echelon of companies that you cannot find, which at the end of the day is the detriment to investors. I do it this way. It's actually much easier to raise capital in America. I do it the harder way because quite frankly, it's better for investors.
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Interviewer3:04
Do you think there's a risk then, Martin, that given just this onslaught of SPACs raising money right now, a lot of subpar deals kind of come to fruition as this frenzy kind of plays itself out?
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Martin Franklin3:18
You know, this is going to end badly. It always does. It's the same as it's as old as time. So at the end of the day, when you have an overcrowded field, too many people raising these vehicles chasing the same kind of things, and you have companies that have no earnings, no profits, and their stocks are flying, the end—it's the same as 2000. You can read a book called 'Devil Take the Hindmost' and it'll give you all the history. It's all there. So the difference is I think that not that many people are going to get hurt by this other than the actual companies that completed transactions. The nice thing about U.S. SPACs is that when the tide turns, the deals that haven't been done, everybody will get the money back.
