Executive Summary / Key Takeaways

• McKinley Acquisition Corporation (MKLY) is a Special Purpose Acquisition Company (SPAC) poised to identify and execute a significant business combination, representing a unique investment opportunity centered on the potential of its future target.
• The company successfully completed its Initial Public Offering (IPO) in August 2025, raising over $172.5 million for its Trust Account, providing substantial capital for a strategic acquisition.
• MKLY's core differentiators lie in its strategic agility and access to capital, enabling it to pursue high-growth sectors and potentially innovative technologies more rapidly than traditional operating companies.
• Key risks include the inherent uncertainty of completing a suitable business combination within its 18-month window, potential dilution from future equity issuances, and broader geopolitical and economic headwinds impacting target identification.
• The investment thesis hinges on management's ability to leverage its blank check structure to secure a transformative deal, particularly in sectors benefiting from trends like energy infrastructure demands driven by AI and data centers.

The Blank Check's Strategic Play in a Dynamic Market

McKinley Acquisition Corporation (NASDAQ:MKLY) stands as a blank check company, or Special Purpose Acquisition Company (SPAC), incorporated on March 27, 2025, with a singular mission: to identify and consummate a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more operating businesses. Unlike traditional operating companies, MKLY's current value proposition is not derived from existing revenue streams or operational performance, but rather from its potential to unlock significant value through a strategic acquisition. This unique structure positions MKLY as a vehicle for investors seeking exposure to a future, yet-to-be-determined, high-growth enterprise.

The company's strategic approach is rooted in its inherent flexibility and access to capital. As a SPAC, MKLY's "technology" is its deal-making platform and the expertise of its sponsor, McKinley Partners LLC, in identifying and structuring complex transactions. This strategic agility allows MKLY to potentially enter high-growth sectors, such as those influenced by emerging trends like the increasing energy demands of AI and data centers, more swiftly than established players. While MKLY itself does not possess proprietary operating technology, its structure is designed to acquire businesses that may have differentiated technologies, thereby offering investors exposure to innovation. The strategic intent is to leverage this structure for rapid market entry and potentially enhanced technological offerings post-combination, which could lead to stronger customer loyalty and superior growth opportunities.

The broader market landscape presents both opportunities and challenges for MKLY's acquisition strategy. Geopolitical instability, stemming from conflicts like the Russia-Ukraine and Israel-Hamas situations, introduces volatility and disruption across global markets. These factors, alongside the implementation of tariffs—such as the U.S. minimum 10% baseline tariff on imports effective April 5, 2025, and higher tariffs on specific nations—could adversely affect the company's search for an initial business combination and the financial viability of potential target businesses. Despite these headwinds, the ongoing demand for robust energy infrastructure, partly fueled by the expansion of data centers, creates a fertile ground for potential acquisition targets.

Capital Formation and Financial Foundation

McKinley Acquisition Corporation's journey began with foundational financing. On March 27, 2025, the company secured a loan agreement with its Sponsor for up to $125,000, later amended to $185,000, to cover initial public offering expenses. By April 9, 2025, 6.54 million Class B ordinary shares, or Founder Shares, were issued to the Sponsor for a $25,000 payment. As of June 30, 2025, prior to its public offering, MKLY reported no cash and a working capital deficit of $98,122, raising substantial doubt about its ability to continue as a going concern. This financial position underscored the critical importance of a successful IPO to fund its operations and, ultimately, its business combination.

The company achieved a significant milestone with the consummation of its Initial Public Offering on August 13, 2025. MKLY sold 15.00 million Public Units at $10 per unit, generating gross proceeds of $150.00 million. Each Public Unit comprises one Class A ordinary share and one right to receive one-tenth of one Class A ordinary share upon the completion of a business combination. Concurrently, 465,000 private placement units were sold to the Sponsor and underwriters at $10 per unit, totaling $4.65 million. Transaction costs for the IPO amounted to $7.26 million, including a $1.50 million cash underwriting fee, a $4.50 million deferred underwriting fee, and $1.26 million in other offering costs.

Further bolstering its capital, Clear Street exercised its over-allotment option on August 15, 2025, for an additional 2.25 million units at $10 per unit, generating $22.50 million in proceeds, which were placed into the Trust Account on August 19, 2025. Following these transactions, a substantial $172.50 million from the IPO and over-allotment proceeds was deposited into a Trust Account. These funds are primarily invested in U.S. government treasury obligations or money market funds, with the intention of being used for the initial business combination. The $185,000 promissory note to the Sponsor was repaid in full.

MKLY's operational expenses since inception have been limited to formation, general, and administrative costs. For the three months ended June 30, 2025, these expenses totaled $54,820, resulting in a net loss of $54,820. From inception (March 27, 2025) through June 30, 2025, the total formation, general, and administrative expenses and net loss amounted to $63,421. These figures reflect the pre-operational nature of a SPAC, with significant operating revenues not anticipated until after a business combination is completed. Post-IPO, the company expects increased expenses associated with public company compliance and due diligence for potential targets.

Competitive Landscape and Strategic Positioning

McKinley Acquisition Corporation operates within a competitive landscape that includes other SPACs vying for attractive targets, as well as established operating companies in sectors it might target, such as energy infrastructure and utilities. Compared to industry stalwarts like MYR Group Inc. (MYRG), Quanta Services Inc. (PWR), and NextEra Energy Inc. (NEE), MKLY's market positioning is distinct. As a blank check company, it lacks the established operational footprint, diversified revenue streams, and long-standing customer relationships that these mature companies possess.

MYR Group, specializing in electrical construction and maintenance, and Quanta Services, a leader in infrastructure services, demonstrate consistent revenue growth and strong profitability driven by existing contracts in energy infrastructure. NextEra Energy, a major utility focused on clean energy, benefits from regulatory advantages and large-scale operations, yielding steady revenue and robust cash flow. These competitors exhibit superior financial health, operational efficiency, and market share capture compared to MKLY's pre-combination status.

MKLY's competitive advantages stem from its SPAC structure: access to capital markets and strategic agility. This allows for faster entry into high-growth sectors and the potential to acquire complementary technologies, potentially exploiting weaknesses in adaptability among more entrenched players. For instance, while MYR Group excels in project expertise, MKLY could counter by quickly acquiring a company with advanced energy management solutions, enhancing its market share in emerging segments. Similarly, against Quanta Services' scale, MKLY's ability to move quickly on deals could lead to faster growth trajectories by targeting niche opportunities, such as those in data center support, that might be overlooked by larger entities.

However, MKLY faces significant competitive disadvantages, primarily its limited operational scale and the inherent uncertainties of merger execution. The absence of an operating business means higher pre-merger overhead costs and a lack of immediate profitability or cash flow generation, making direct financial comparisons with operating companies challenging. This vulnerability exposes MKLY to risks from established players like NextEra Energy, particularly in regulated markets where scale and long-term relationships are paramount. The dependence on a successful merger also introduces execution risk, which could affect future revenue and expose the company to market volatility.

Outlook and Risks

The outlook for McKinley Acquisition Corporation is entirely dependent on its ability to successfully identify and consummate an initial business combination within its 18-month "Completion Window" from the IPO closing, or a later period approved by shareholders. The company intends to use substantially all of the $172.50 million held in its Trust Account, along with any interest earned (excluding deferred underwriting commissions and permitted tax withdrawals), to finance this combination. Management anticipates targeting businesses with enterprise values greater than what can be acquired solely with the net proceeds from the IPO and private placement, implying a potential need for additional financing through equity, equity-linked securities, or debt.

MKLY has estimated its primary liquidity requirements prior to a business combination to include approximately $1.00 million for legal, accounting, and third-party expenses related to target search and due diligence; $465,000 for SEC reporting obligations; $180,000 for infrastructure, technology, and administrative expenses; $175,000 for D&O liability insurance premiums; and $580,000 for working capital and reserves. These are estimates and actual expenses may vary.

The investment in MKLY carries several pertinent risks. The "going concern" uncertainty, highlighted by its working capital deficit prior to the IPO, remains a fundamental concern until a business combination is completed. There is no assurance that management's plans to consummate a business combination will be successful within the stipulated timeframe. Furthermore, the proceeds in the Trust Account could become subject to claims from the company's creditors, potentially taking priority over public shareholders. The Sponsor's ability to satisfy indemnification obligations against third-party claims is also uncertain, as its assets are believed to be primarily company securities.

Significant dilution of equity interests for IPO investors is a risk, particularly if additional shares are issued in connection with a business combination or if anti-dilution provisions for Class B ordinary shares result in a greater than one-to-one conversion to Class A ordinary shares. Incurring substantial debt for an acquisition could also lead to default and foreclosure if the post-combination entity's operating revenues are insufficient to cover debt obligations. The ongoing geopolitical conflicts and tariffs also pose a risk to the company's ability to find and successfully integrate a target business.

Conclusion

McKinley Acquisition Corporation (NASDAQ:MKLY) presents a speculative yet potentially rewarding investment opportunity, fundamentally tied to its ability to execute a transformative business combination. The company has successfully established a robust capital base of over $172.5 million in its Trust Account, providing the necessary dry powder for a significant acquisition. Its blank check structure offers strategic agility, allowing it to pursue high-growth sectors and potentially innovative technologies that could capitalize on broad industry trends, such as the escalating energy demands from AI and data centers.

While MKLY currently lacks operational revenues and faces the inherent uncertainties and competitive pressures of the SPAC model, its future hinges on the judicious selection and successful integration of a target business. The investment thesis is a bet on management's capability to identify a compelling opportunity, leverage its capital and structural flexibility, and navigate the complex M&A landscape. For discerning investors, MKLY represents a unique avenue to participate in the creation of a new public entity, with the potential for substantial value creation if a well-executed business combination materializes.