Why Merlin went public via a SPAC

There are many reasons for a business to merge with a special purpose acquisition company (SPAC). For Merlin, combining with a SPAC earlier this year gave the aerospace and defense tech startup the legitimacy it needed with customers, CFO Ryan Carrithers told CFO Brew.

Customers of the Boston-based startup, which builds AI-powered autonomous flight software, include the United States Special Operations Command and the United States Air Force, both part of the Department of Defense.

The US government is more likely to hand out long-term contracts to a publicly traded company than a startup that may not raise another round of capital, Carrithers said.

“We’re seeing more government contracts going to companies where the government wants to have transparency around that company, [and] wants to know that that company is going to be around for the foreseeable future, because these are generally pretty longer term contracts,” he said.

The sponsor matters. Why else go through an IPO via a SPAC? Carrithers, who has worked for three SPACs, including Merlin, over the last six years, cited the ability to work with an experienced sponsor as one reason. Inflection Point, the investment firm founded by Michael Blitzer, an entrepreneur and investor, has sponsored several SPACs that have completed mergers with businesses including space infrastructure company Intuitive Machines and USA Rare Earth, a critical minerals mining company.

Companies considering the SPAC route should pick a partner that has experience in whatever industry they operate in, Carrithers said. “Just [make] sure there’s a really strong strategic fit and vision,” he said.

No guarantees. Merlin is one of 25 companies to complete a SPAC merger in 2026 so far, according to SPAC Research data. SPACs, or blank-check companies, typically raise money by selling units in an IPO. SPACs put these funds into a trust. Shareholders have the option to redeem their shares once a merger target is identified, however, so the total dollar amount in the trust can drop.

So SPACs often use a private investment in public equity, or PIPE, to bring in more capital in case of a large number of redemptions.

Merlin’s merger with the Inflection Point Acquisition Corp IV SPAC produced about $230 million in gross proceeds. But just over 10% came from the Inflection Point trust, Carrithers said. That means shareholders redeemed about 90% of the public shares.

Benjamin Kwasnick, founder of SPAC Research, said trust redemptions of more than 90% were the norm from 2023 to 2025. “Although in the last nine months we’ve seen deals that are able to generate more enthusiasm and so the average is ticking lower,” Kwasnick said in an email to CFO Brew.

Merlin made up the proceeds shortfall through a PIPE that raised over $200 million in gross proceeds, Carrithers said. Overall, SPAC redemptions remain high so more SPACs are raising bigger PIPEs, he said. “It’s not always guaranteed that you’re going to receive that money from the trust, and so you really want to raise a PIPE in parallel because the PIPE is more guaranteed money,” he said.

Acquisition plans. Merlin plans to use the funds to speed certification of the Merlin Pilot system, expand its commercial and defense programs, invest in product development, and support long-term growth initiatives. That may include acquisitions, Carrithers said.

He envisions a world composed of more than five major defense prime contractors with the US government—perhaps 10 to 15, he said. “There’s gonna be some consolidation in the industry, and so doing M&A activity as a private company is typically much more difficult than as a public company,” Carrithers said. However, being able to do acquisitions was “not the sole reason we went out and raised the capital.”