WEBVTT - Exploring Trends in Private Equity 0:00:01.800 --> 0:00:04.400 This is Bloomberg Business Week. I'm Carole Masser and I'm 0:00:04.440 --> 0:00:07.240 Bloomberg Quick Takes Tim Stanivik. We're here every day bringing 0:00:07.280 --> 0:00:09.760 you the latest news from the world of business and finance, 0:00:09.800 --> 0:00:13.640 plus technology, politics, economics, all partnising the power of Business 0:00:13.640 --> 0:00:17.119 Week reporters and editors, not to mention our journalists and 0:00:17.120 --> 0:00:19.960 analyst in more than one twenty countries. You can download 0:00:19.960 --> 0:00:23.439 Bloomberg Business Weekend iTunes, SoundCloud, or Bloomberg dot Com. You 0:00:23.440 --> 0:00:25.400 can also listen to our radio show at two pm 0:00:25.400 --> 0:00:28.360 Eastern Time on Bloomberg Radio or watch us on YouTube 0:00:28.360 --> 0:00:31.880 search Bloomberg Global News. Let's bring in our next guest here, 0:00:31.960 --> 0:00:35.760 Melissa Baker. She's the founding partner of Fenwick Brands, a 0:00:35.840 --> 0:00:39.599 female led consumer focused investment firm. Melissa, thank you as 0:00:39.640 --> 0:00:42.320 always for joining us. How are you doing great, Happy 0:00:42.360 --> 0:00:44.640 to be with you all today. We're happy to have you. Well, 0:00:44.720 --> 0:00:48.319 let's dive right in here. Retail consumer package goods. I'm 0:00:48.360 --> 0:00:51.479 a market scale from a stock market perspective. These stocks 0:00:51.800 --> 0:00:54.120 have been doing really well because people are saying, in 0:00:54.120 --> 0:00:56.960 the time of recession, everyone's going to need food, Everyone's 0:00:56.960 --> 0:01:00.000 going to need these kind of basic items. So naturally 0:01:00.440 --> 0:01:02.560 you have to invest in those shares, but talk to 0:01:02.600 --> 0:01:06.600 us about the trends in this industry right now. Yeah, 0:01:06.680 --> 0:01:09.720 it's definitely an interesting time. I think, you know, if 0:01:09.760 --> 0:01:12.280 I put my investor head on, you know, we we 0:01:12.360 --> 0:01:16.280 are focused more on earlier stage consumer businesses and it's interesting. 0:01:16.280 --> 0:01:18.280 You know, we're coming off this period of what I 0:01:18.280 --> 0:01:22.200 would call, you know, over inflated and over invested markets 0:01:22.240 --> 0:01:25.760 where we saw a lot of capital come into the market, 0:01:25.959 --> 0:01:30.080 pressure to get it to work, causing really high valuations 0:01:30.200 --> 0:01:34.480 and really kind of gross prioritized over profit. You know. 0:01:34.800 --> 0:01:38.039 Fast forward to today. Um, you know, I think the 0:01:38.120 --> 0:01:40.560 positive news is we're starting to see some much needed 0:01:40.600 --> 0:01:45.360 course correction. You know, you're right, consumers need staples, um. 0:01:45.440 --> 0:01:48.360 But more importantly, we need these earlier stage businesses to 0:01:48.480 --> 0:01:51.960 build healthy and profitable companies, and I think we're starting 0:01:51.960 --> 0:01:55.840 to become prioritized to gaps. Melissa, Melissa, I just want 0:01:55.840 --> 0:01:56.960 to jump in here, is we don't have a ton 0:01:57.000 --> 0:01:59.920 of time. I'm wondering how you're seeing this course for 0:02:00.000 --> 0:02:01.720 should play out in the private side as a private 0:02:01.720 --> 0:02:04.520 equity investor, of what you're hearing from your portfolio companies, 0:02:04.560 --> 0:02:07.960 which include URSA, major let me shine Madison read back 0:02:08.000 --> 0:02:10.639 to the roots among others. Um, what are you hearing 0:02:10.680 --> 0:02:14.520 from them about course correction right now? Are they under pressure? Yeah? 0:02:14.600 --> 0:02:17.800 I think Look, everybody's under pressure to just maintain some 0:02:17.960 --> 0:02:20.360 consistent levels of growth. But I think we've got strong 0:02:20.440 --> 0:02:23.839 value propositions to the consumer. I think we're being much 0:02:23.880 --> 0:02:26.480 more thoughtful and discerney as we think about you know, 0:02:26.680 --> 0:02:29.720 omni channel models and where the product is and being 0:02:29.760 --> 0:02:32.040 with the consumer where they are in purchase. And I 0:02:32.080 --> 0:02:35.480 think all of our companies are well positioned, but definitely 0:02:36.160 --> 0:02:39.760 long term minded, right um, and really focused on loyalty 0:02:39.800 --> 0:02:42.560 and retention. So what are you worried about here? What 0:02:42.639 --> 0:02:48.400 keeps you up at night? Oh? Lots of thanks, um, 0:02:48.440 --> 0:02:51.360 But no, I think look, consumers are evolving, right and 0:02:51.400 --> 0:02:53.320 they purchased with their head in their heart. And I 0:02:53.360 --> 0:02:57.520 think the definition of brand and and the value of 0:02:57.639 --> 0:03:01.399 brand to the consumer um ever changing. And it's it's 0:03:01.440 --> 0:03:04.760 important for our companies to be well positioned, right. They 0:03:04.760 --> 0:03:06.680 have to solve for the purchase friction. They have to 0:03:06.720 --> 0:03:08.639 meet the consumers where they are in the head and 0:03:08.680 --> 0:03:12.520 the heart and well developed omni channels. And so for me, 0:03:12.600 --> 0:03:15.800 it's like Look, we've we've got good value propositions, but 0:03:15.880 --> 0:03:18.160 we just need to be with that consumer and the 0:03:18.160 --> 0:03:22.160 consumers changing, and that's a constant struggle and opportunity for 0:03:22.200 --> 0:03:26.480 our businesses and making sure we're well positioned. Melissa. You know, 0:03:26.840 --> 0:03:30.160 it's so funny. I I moderated panel at Milkin with 0:03:30.240 --> 0:03:33.400 a bunch of folks in private equity, and I think 0:03:33.440 --> 0:03:35.760 every single one of them was based in New York 0:03:35.800 --> 0:03:40.040 City and you're joining us from Birmingham, Alabama, where you're based, 0:03:40.080 --> 0:03:42.920 And I'm wondering how that goes. And I mean, if 0:03:42.960 --> 0:03:44.880 you think about it, you know, we see it so 0:03:44.960 --> 0:03:47.080 much of the focus here in New York City, So 0:03:47.320 --> 0:03:49.640 how does it help and how does it hinder you 0:03:49.640 --> 0:03:52.800 at points to be based there? Yeah, well, look, I 0:03:52.840 --> 0:03:56.960 think look we're hide Jim right, UM, and I think 0:03:57.000 --> 0:04:00.000 we've got a great portfolio. So I think our portfolio, 0:04:00.000 --> 0:04:03.520 our reputation, you know, speaks for UM itself. But I 0:04:03.600 --> 0:04:06.840 will say that we're very relational, and I think like 0:04:06.960 --> 0:04:09.720 sometimes being a non coastal UM, you know, we have 0:04:09.760 --> 0:04:14.240 a different approach to kind of Middle America. Lens On right, 0:04:14.480 --> 0:04:18.160 the consumer UM and the consumers not just in coastal cities, 0:04:18.200 --> 0:04:20.680 and I think we have right. We kind of leverage 0:04:20.760 --> 0:04:23.840 that mindset and being where we are to to our advantage, 0:04:23.839 --> 0:04:26.160 and I think we bring something right that's a little 0:04:26.200 --> 0:04:30.120 bit different to the to the table. Let's try and 0:04:30.120 --> 0:04:35.159 talk very quickly about just being a female lead investment firm. 0:04:35.200 --> 0:04:38.599 I think that's incredible. Walk us through perhaps a little 0:04:38.600 --> 0:04:41.359 bit of your perspective being a female founder in a 0:04:41.400 --> 0:04:44.839 private equity business. We got about a minute here. Yeah, 0:04:44.920 --> 0:04:47.720 I took a very unsimentional path, you know, the classical 0:04:47.800 --> 0:04:52.360 musician turn marketer turned, you know, sorry, classical musicians. Yes, 0:04:52.640 --> 0:04:57.919 what did you play violence? Ye? That second grade was 0:04:57.960 --> 0:05:02.400 not a classical musician. But nevertheless continue Lissa, Yeah, nonetheless, 0:05:02.400 --> 0:05:05.600 I'm not your typical kind of right PE pedigree. Um. 0:05:05.640 --> 0:05:07.479 You know, for me, it was about leveraging all of 0:05:07.520 --> 0:05:10.480 my in the trenches operating an expertise to small brands 0:05:10.520 --> 0:05:13.040 that needed help. We saw an inefficiency kind of in 0:05:13.120 --> 0:05:16.719 the funding market between VC and PE and where partnerships 0:05:16.760 --> 0:05:19.360 and value added capital really could could make a difference. 0:05:19.360 --> 0:05:21.800 Then I think for us, being a female lead firm, 0:05:21.800 --> 0:05:25.279 we're the consumer um the gain conviction of the product early, 0:05:25.320 --> 0:05:26.919 and I think we can bring more EQ to the 0:05:26.960 --> 0:05:30.880 partnership building companies is hard. It takes time. Um, I 0:05:30.920 --> 0:05:33.360 think there's lots of pivots, right, and I think it's 0:05:33.400 --> 0:05:36.720 not just a spreadsheet, but it's a relationship and a partnership, 0:05:36.760 --> 0:05:40.159 and I think we kind of can can bring a 0:05:40.240 --> 0:05:43.719 little more of the relationship and the empathy to the 0:05:43.760 --> 0:05:46.359 table with these companies and kind of what they're going through. 0:05:46.480 --> 0:05:49.039 And yes, we have the capital capital of the commodity, 0:05:49.040 --> 0:05:52.040 it's everywhere, but I think for us, it's like how 0:05:52.080 --> 0:05:54.520 you capitalize on the pivots and how you manage through 0:05:54.520 --> 0:05:57.560 growth inflection and I think that, um, you know, takes 0:05:57.600 --> 0:05:59.640 a lot of work in handholding and we bring that 0:05:59.680 --> 0:06:03.200 relate Schnell Peace to the public as well. Melissa Baker, 0:06:03.480 --> 0:06:05.839 really great to have you back on Bloomberg Business Week Radio. 0:06:05.880 --> 0:06:08.120 Thanks for joining us once again. She's founding partner of 0:06:08.160 --> 0:06:11.320 Fenwick Brands. Joining us on the phone from Birmingham, Alabama. 0:06:11.560 --> 0:06:15.600 This is Bloomberg Business Week with Carol Messer and Bloomberg 0:06:15.640 --> 0:06:19.839 Quick Takes Tim Stinovic on Bloomberg Radio. Well story featured 0:06:19.880 --> 0:06:22.560 in the new issue of Business Week magazine, written by 0:06:22.600 --> 0:06:27.520 Alex Barrinka, Technology reporter for Bloomberg News. Is all about 0:06:27.520 --> 0:06:31.520 how one of TikTok's biggest stars is roasting dudes for 0:06:31.600 --> 0:06:35.920 misogyny and racism. Alex Brinka's technology reporter for Bloomberg New. 0:06:36.000 --> 0:06:38.440 She joins us from our Los Angeles bureau. You can 0:06:38.440 --> 0:06:40.839 see her on YouTube if you're watching us there. Also 0:06:40.880 --> 0:06:43.680 with us is Joel Weber, the editor of Bloomberg Business Week. 0:06:43.680 --> 0:06:47.480 He's with us right now in the Bloomberg Interactive Broker studio. So, Joel, 0:06:47.760 --> 0:06:51.799 it's so funny. We're talking about a person named Drew F. Wallow, 0:06:52.400 --> 0:06:55.720 and you know, we think about the power of that 0:06:55.960 --> 0:06:59.680 people have with these platforms. She has got seven point 0:06:59.760 --> 0:07:04.040 five five million followers on TikTok. So it's fewer than 0:07:04.440 --> 0:07:08.200 Justin Bieber, but she's got like as many as Jimmy Fallon, 0:07:08.440 --> 0:07:10.680 almost as much as Jimmy Fallon, and and yet you know, 0:07:10.760 --> 0:07:13.920 not maybe not a household name, and it just speaks 0:07:13.920 --> 0:07:18.640 to how well uh, she owns TikTok. And on top 0:07:18.680 --> 0:07:21.680 of that, we're um and working on a special issue 0:07:21.960 --> 0:07:24.760 this week. You're gonna see some more stories that are 0:07:24.760 --> 0:07:27.440 gonna be thematically linked to this one. UM. This was 0:07:27.480 --> 0:07:30.600 the first out of the gate. Uh. And it was 0:07:30.640 --> 0:07:33.200 also just totally caught our attention from the moment that 0:07:33.320 --> 0:07:37.640 Alex of flagged. Uh. This is an option because uh, 0:07:38.040 --> 0:07:43.800 Drew in the aftermath of the Supreme Court decision, Uh 0:07:44.040 --> 0:07:48.840 that basically you know, upended Row versus Wade. Um. We're 0:07:49.760 --> 0:07:53.920 thematically talking about that. Uh. This this in this week's issue. Um. 0:07:54.000 --> 0:07:57.600 And this is a sort of a surprising silver lining 0:07:57.600 --> 0:08:00.280 to all of that, which is how laughter can actually 0:08:00.320 --> 0:08:05.119 become a weapon. Alex Philis more about Drew's approach here. Yeah, 0:08:05.160 --> 0:08:07.120 and you know, you say she's not a household name, 0:08:07.120 --> 0:08:10.080 but if you're on TikTok, she's absolutely a household name 0:08:10.480 --> 0:08:14.480 for better or for some of these, um, misogynistic type 0:08:14.520 --> 0:08:17.880 online trolls. For worse, Drew as a character who's really 0:08:18.120 --> 0:08:22.480 um increased in popularity over the last year. She we 0:08:22.560 --> 0:08:25.280 got to chat for this story. She is sharp, she 0:08:25.480 --> 0:08:29.760 is witty, but she also cares really deeply about women 0:08:29.920 --> 0:08:33.440 who she says she's protecting. On the platform, if you 0:08:33.480 --> 0:08:36.400 see a Drew video in your feed on TikTok, you'll 0:08:36.440 --> 0:08:39.680 be scrolling and um, a video of a guy will 0:08:39.679 --> 0:08:43.240 typically pop up saying some pretty awful things. There are 0:08:43.360 --> 0:08:46.920 the racists, their sexist, uh, they're fat phobic. And then 0:08:47.000 --> 0:08:49.480 all of a sudden, Drew's face will cut in, usually 0:08:49.520 --> 0:08:53.240 with her kind of trademark laughter, cackling at these men, 0:08:53.760 --> 0:08:57.240 and she basically kind of dismantles them, and she doesn't 0:08:57.280 --> 0:09:00.600 in a really interesting way. Drew is very smart and clever, 0:09:00.800 --> 0:09:04.080 and she makes some really like logical points and and 0:09:04.200 --> 0:09:08.280 basically picks apart these guys with logic. But she also 0:09:08.360 --> 0:09:12.800 takes these tactics that online trolls are really known for comedy, 0:09:12.920 --> 0:09:16.520 commenting on people's appearance, telling the guy he's already going 0:09:16.600 --> 0:09:20.120 bald and kind of wraps the logic in this wrapper 0:09:20.200 --> 0:09:22.880 of of the same tactics that online trolls like to 0:09:22.960 --> 0:09:25.680 use when they go after women on the platform. And 0:09:25.720 --> 0:09:29.240 I'll tell you, I've seen these guys takedown videos or 0:09:29.280 --> 0:09:32.320 just like completely delete their accounts. They don't take it 0:09:32.360 --> 0:09:35.320 as well um as maybe some of their victims do. 0:09:35.520 --> 0:09:38.640 So she's really kind of established this role for herself, almost, 0:09:38.640 --> 0:09:42.280 this like folk hero type role going after guys who 0:09:42.280 --> 0:09:50.120 are kind of awful on the internet, editorializing too much, Alex, 0:09:50.160 --> 0:09:53.120 you should know the minute you said balding, there was 0:09:53.160 --> 0:09:56.960 a major reaction in the control room and studio when 0:09:56.960 --> 0:09:59.600 I was not prepared for. I will admit, um, Alex, 0:09:59.679 --> 0:10:02.520 Let's talk about the the approach that TikTok takes here. 0:10:02.880 --> 0:10:05.920 The internet makes it very easy for people to say 0:10:06.000 --> 0:10:10.040 all sorts of things. It's also, I think something social 0:10:10.040 --> 0:10:14.320 media platforms have really tried to address walkers through how 0:10:14.400 --> 0:10:18.679 maybe that's not enough. Yeah, so the platforms are are 0:10:18.760 --> 0:10:22.160 a little bit reactive, right. They might ban certain words 0:10:22.320 --> 0:10:26.040 or allow creators to mute words or block people. Um, 0:10:26.040 --> 0:10:29.400 but these guys will um kind of take tactics that 0:10:30.000 --> 0:10:33.680 that stay step ahead or trolls to speak more generally. 0:10:34.160 --> 0:10:37.520 If they are banning things like, um like quote I 0:10:37.640 --> 0:10:41.400 hate fat women, and folks notice that that language is 0:10:41.400 --> 0:10:44.480 getting banned or taken down for bullying by the platforms, 0:10:44.760 --> 0:10:47.839 they'll change tact and say things like I only love 0:10:47.920 --> 0:10:51.880 men who weigh less women who weigh less than twenty pounds. So, um, 0:10:51.920 --> 0:10:56.080 the platforms are, whether it's TikTok, Instagram, Facebook, Twitter, they 0:10:56.120 --> 0:10:59.320 all have policies in place to kind of combat bullying. 0:10:59.440 --> 0:11:02.600 But frankly, um, these bad actors on the platform move 0:11:02.640 --> 0:11:05.480 a lot quicker and speak in different languages or use 0:11:05.640 --> 0:11:09.080 code that is very well recognized by people on the internet. 0:11:09.120 --> 0:11:11.040 But it's this little bit of a game of kind 0:11:11.040 --> 0:11:14.000 of whackable. Um. What Drew has been able to do 0:11:14.320 --> 0:11:18.120 is basically keep up with the times and kind of um, 0:11:18.160 --> 0:11:22.240 you know, uh, slide a knife through these guys UM 0:11:22.320 --> 0:11:26.079 online and keep up with what they're saying and how 0:11:26.080 --> 0:11:28.680 they're kind of skirting these rules. So there's some things 0:11:28.679 --> 0:11:32.480 out there. A lot of it depends on UM fans, followers, 0:11:32.600 --> 0:11:36.160 or people on the platforms to report things themselves. Um. 0:11:36.200 --> 0:11:37.959 But you know, if you can stay a step ahead, 0:11:38.040 --> 0:11:40.120 then maybe that hand to hand combat is a little 0:11:40.120 --> 0:11:42.520 bit more fierce. In the moment, it just feels like 0:11:42.760 --> 0:11:46.760 you she may have like no shortage of options to 0:11:46.920 --> 0:11:49.880 pick from. And I'm curious, did you put that towards Earlia? 0:11:49.920 --> 0:11:53.880 How does she pick who she takes down? Yeah, so 0:11:53.960 --> 0:11:56.640 initially she would kind of um, I'm talking a year 0:11:56.679 --> 0:11:59.319 and a half ago and she started this um uh 0:11:59.320 --> 0:12:02.640 this kind of half. She would look for guys and 0:12:02.720 --> 0:12:06.520 find them who are kind of saying awful things. These days, 0:12:06.559 --> 0:12:11.280 she wakes up to thousands and thousands of notifications across 0:12:11.320 --> 0:12:14.640 all platforms. She has those notifications turned off because there 0:12:14.640 --> 0:12:16.560 are so many of them. Um, but a lot of 0:12:16.600 --> 0:12:20.560 times now her fans, her followers will actually tag her 0:12:20.720 --> 0:12:23.920 in videos of people who are going after women or 0:12:23.920 --> 0:12:28.160 who are uh you know, um slewing racist, misogynistic or 0:12:28.240 --> 0:12:31.440 fat phobic comments on the platform. There's another camp. Um, 0:12:31.480 --> 0:12:33.480 there's a lot of folks who like to attack her. 0:12:33.880 --> 0:12:38.640 So those are coming straight into her notifications as well. Um, 0:12:38.679 --> 0:12:41.320 but you know, it seems like there's a lot out there. 0:12:41.600 --> 0:12:44.160 I will say, Um, she didn't tell me that it's 0:12:44.200 --> 0:12:46.240 getting a little bit tougher to find guys that she 0:12:46.240 --> 0:12:50.640 hasn't roasted before or subject matters she hasn't roasted before. Um, 0:12:50.760 --> 0:12:53.319 So you know, whether that's because she's doing her job 0:12:53.400 --> 0:12:55.679 too well as she sees it, or if things are 0:12:55.679 --> 0:12:58.640 cracking down a little bit, who knows. But a lot 0:12:58.679 --> 0:13:01.880 of these things are referrals. Yeah, she should come over 0:13:01.920 --> 0:13:04.160 to Twitter. I see a lot of this stuff there. Hey, Alex, 0:13:04.200 --> 0:13:05.800 just in the last minute that we have with you, 0:13:06.400 --> 0:13:08.240 can you talk a little bit about the business of 0:13:08.240 --> 0:13:11.400 of somebody with seven point million, seven point five million 0:13:11.400 --> 0:13:14.960 followers on TikTok, Like how does she make money? Yeah? 0:13:15.000 --> 0:13:17.960 Absolutely so, Drew wouldn't divulge exactly how much she makes, 0:13:17.960 --> 0:13:20.240 but she will say she's making a living off of it. Um. 0:13:20.320 --> 0:13:22.600 There are a few venues for somebody like her to 0:13:22.760 --> 0:13:25.880 make money. The platforms do pay out a small amount 0:13:25.920 --> 0:13:29.200 if you're in something like TikTok's creator fund um, but 0:13:29.320 --> 0:13:31.880 when I talk to creators across the platform outside of 0:13:31.920 --> 0:13:35.800 just Drew, they say that's basically coffee money or lunch money. UM. 0:13:35.840 --> 0:13:37.880 Where they make a lot of their money is on 0:13:38.400 --> 0:13:42.560 brand sponsorships, brand partnerships where they'll post sponsored post with 0:13:42.640 --> 0:13:45.920 clothing or other products. Drew also has a podcast, so 0:13:45.960 --> 0:13:48.480 folks will start to venture outside of the platforms as 0:13:48.520 --> 0:13:52.800 well for opportunities for advertisers or sponsors to work with her. 0:13:52.920 --> 0:13:56.640 So mostly platforms, sponsorships or other partnerships is where a 0:13:56.640 --> 0:13:59.040 lot of these folks are making money. Well, it's a 0:13:59.080 --> 0:14:02.800 great story. Al highlights a really important issue and certainly, uh, 0:14:02.880 --> 0:14:04.839 somebody think who's not a household name for people who 0:14:04.880 --> 0:14:08.320 are not on TikTok, including myself Alex Brinka, technology reporter 0:14:08.400 --> 0:14:10.440 for Bloomberg News. Check out our story in the new 0:14:10.480 --> 0:14:13.120 issue of Business Week magazine, on the Bloomberg and online. 0:14:13.120 --> 0:14:18.160 Now this is Bloomberg business Week with Carol Messer and 0:14:18.240 --> 0:14:22.680 Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio, Creating. When 0:14:22.720 --> 0:14:25.920 we talk about the health of the markets, we not 0:14:26.040 --> 0:14:28.720 only look at the equity market and the bond market, 0:14:28.760 --> 0:14:31.080 of course, but we also look at trends that we've 0:14:31.120 --> 0:14:32.920 seen this year I p O S, M and A 0:14:33.040 --> 0:14:35.240 and what's actually happening in the space. And it was 0:14:35.280 --> 0:14:38.120 interesting because in the first half of two we saw 0:14:38.200 --> 0:14:40.920 quite the decline when it came to when it came 0:14:40.920 --> 0:14:42.960 to I p O S and new deals. We are 0:14:43.040 --> 0:14:45.360 still seeing those some M and A activity. I mean, 0:14:45.520 --> 0:14:48.320 what comes to mind last week is the Frontier Sprint 0:14:48.400 --> 0:14:51.360 merger getting dropped and then Jeff Blue coming in and 0:14:51.440 --> 0:14:53.760 being the company that comes in and triest to make 0:14:53.800 --> 0:14:56.440 that acquisition. Let's get an update on the health of 0:14:56.800 --> 0:14:59.600 M and A right now. Mark Cooper is CEO at 0:14:59.600 --> 0:15:02.120 Solemn Partners Mark this afternoon, joins us on the phone 0:15:02.160 --> 0:15:06.000 from New York City, Mark, how are you doing pretty well? 0:15:06.040 --> 0:15:07.720 How are you doing pretty well? So if we were 0:15:07.720 --> 0:15:09.720 doing this conversation a year ago, I think our conversation 0:15:09.760 --> 0:15:11.320 would be a lot different because we would be coming 0:15:11.320 --> 0:15:14.640 off of this, you know, quarter, first half of the 0:15:14.720 --> 0:15:16.880 year that was just so hot. When it came to 0:15:17.600 --> 0:15:18.960 M and A, when it came to I p O. 0:15:19.040 --> 0:15:21.280 Spacks were on the decline BECAUSEY was kind of the 0:15:21.280 --> 0:15:23.600 peak for that. So we saw that coming. Help us 0:15:23.640 --> 0:15:25.520 understand where we are right now though, as we get 0:15:25.520 --> 0:15:31.320 into August. You know, I think we're in a reasonably 0:15:31.320 --> 0:15:35.400 good market. You know, you you can't look at two 0:15:35.440 --> 0:15:41.200 thousand twenty one and compare it to anything. It's a 0:15:41.200 --> 0:15:49.160 a once, it's a once in a generational market for 0:15:49.320 --> 0:15:51.560 M and A and was hitting on all filmsers for 0:15:51.640 --> 0:15:54.560 all kinds of reasons, which no, no need to go 0:15:54.600 --> 0:15:57.600 into right now. But the fact of the matter is, yeah, 0:15:57.640 --> 0:16:01.240 we're off considerably from last year, but we're tracking only 0:16:01.320 --> 0:16:04.200 modestly down down in the nineteen which would be the 0:16:04.240 --> 0:16:08.400 first sort of comparable clean year, if you will, which 0:16:08.480 --> 0:16:11.320 was a very good year. Are they are they different? Mark? 0:16:11.360 --> 0:16:14.720 Are they different types of deals happening this year than 0:16:14.800 --> 0:16:19.160 last year? Well? Yeah, I think you're seeing more going 0:16:19.200 --> 0:16:22.000 private transactions and that would be natural given stock prices 0:16:22.040 --> 0:16:26.040 has been lower. I think you're seeing a higher percentage 0:16:26.040 --> 0:16:31.120 of transactions being done by private equity buyers. Uh. And 0:16:31.400 --> 0:16:36.680 interestingly enough, you're seeing probably more in volume of mega 0:16:36.760 --> 0:16:40.520 transactions and they sold last year. Now that doesn't necessarily 0:16:40.560 --> 0:16:45.160 have anything to do with macroeconomic conditions. It could be 0:16:45.240 --> 0:16:48.720 everything about just specific transactions like you know, like Musk 0:16:48.800 --> 0:16:51.320 buying Twitter for four billion. That could move the needle 0:16:51.400 --> 0:16:56.200 pretty significantly. But the private equity community still has I 0:16:56.240 --> 0:16:59.240 don't know, trillion and a half dollars of excess capital 0:16:59.800 --> 0:17:03.600 or dound. And you know, one interesting aspect of the 0:17:03.640 --> 0:17:07.960 market this go around versus two thousand and eight is 0:17:08.000 --> 0:17:12.160 the whole private credit markets. It's the debt markets. So 0:17:12.280 --> 0:17:17.800 traditionally stock markets went down as they did, uh and 0:17:17.880 --> 0:17:21.960 infestrates go up as they are. The public debt markets 0:17:22.640 --> 0:17:27.800 just closed down. They shut which happened to happen, you know, 0:17:27.960 --> 0:17:29.960 for a couple of weeks or a couple of months 0:17:30.800 --> 0:17:33.600 this year. But what really is going on is the 0:17:33.640 --> 0:17:37.359 private credit markets are stepping in and picking up the slack. 0:17:37.440 --> 0:17:40.760 And the private correct credit markets don't care as much 0:17:40.800 --> 0:17:44.960 about near term volatility. What they care about is credit 0:17:45.640 --> 0:17:50.040 and return on capital. So while interests going up slightly, 0:17:50.240 --> 0:17:54.480 it's still still working well. Speaking of interest rates going 0:17:54.560 --> 0:17:59.920 up slightly slightly, as a feeling an understatement. But it's 0:18:00.000 --> 0:18:02.359 an't there this incentive built into the market here that 0:18:02.480 --> 0:18:03.920 if I mean, I think a five year old could 0:18:03.920 --> 0:18:07.880 say this. If you're say allowance is worth less tomorrow 0:18:07.920 --> 0:18:10.600 given an inflationary environment, and makes sense to spend it today, 0:18:10.960 --> 0:18:13.600 you're saying that a toddler can do time value of money. 0:18:14.240 --> 0:18:19.000 I'm saying you can. Yeah, if you tell can your 0:18:19.040 --> 0:18:21.760 daughter do this stuff? No? Okay, come on, this is 0:18:21.800 --> 0:18:24.320 like business school stuff. Keep continue, Please thank you if 0:18:24.359 --> 0:18:26.280 you give. If you give a child a quarter and 0:18:26.320 --> 0:18:28.080 say this quarter is not going to get you a 0:18:28.200 --> 0:18:31.000 Rubik's Cuba candy bar or whatever tomorrow, they're going to 0:18:31.080 --> 0:18:35.280 say I have to spend it today. It's true. I'm 0:18:35.400 --> 0:18:39.199 clearly steaking to a different anyways, Mark My point is 0:18:39.240 --> 0:18:41.200 that there's so much cash on the balance sheets right now. 0:18:41.240 --> 0:18:42.960 This is going to be worth less tomorrow. Just give 0:18:43.000 --> 0:18:48.760 them the inflationary environment. Why aren't we seeing more emine? Well, 0:18:49.600 --> 0:18:52.280 you know you got to be careful with that concept. 0:18:52.600 --> 0:18:57.040 It's worth less tomorrow unless you invested well. Right, So 0:18:57.960 --> 0:19:01.359 the answer is, we're not. Corporation are gonna essentially do 0:19:01.480 --> 0:19:04.280 M and A because they think it's the best, because 0:19:04.320 --> 0:19:08.800 they think it is as simply a good way to 0:19:08.840 --> 0:19:10.959 return on their capital. I mean, yes, of course ray 0:19:11.000 --> 0:19:13.919 return comes into play, but they're looking at strategic issues. 0:19:14.320 --> 0:19:16.920 They're looking at, you know, do they have more better 0:19:16.960 --> 0:19:20.719 investment opportunities within their existing business, So they look at 0:19:20.720 --> 0:19:22.440 a whole beriad of things. They're also looking at the 0:19:22.480 --> 0:19:25.080 health of their business. And frankly, the flip side of 0:19:25.119 --> 0:19:28.359 your argument is with inflation as it is, consumer demand 0:19:28.440 --> 0:19:32.400 dropping and the consumer driven companies, I mean, that could 0:19:32.520 --> 0:19:34.040 suggest that they're gonna have a fall off in their 0:19:34.080 --> 0:19:37.000 business and so they might want to be conservative. Now 0:19:37.320 --> 0:19:40.600 to your to to the ultimate point is if you 0:19:40.640 --> 0:19:42.959 look back on two thousand and eight, that was a 0:19:43.000 --> 0:19:46.399 great time to be a buyer, because when do you 0:19:46.440 --> 0:19:48.919 want to buy. You want to buy when things aren't 0:19:49.000 --> 0:19:52.520 so great. You're buying a better prices, uh theoretically, and 0:19:52.600 --> 0:19:57.359 hopefully you're buying assets that weren't necessarily available to you 0:19:57.480 --> 0:20:00.439 before when the markets were so robust then there was 0:20:00.440 --> 0:20:04.800 such a great demand. But Mark you said the best 0:20:04.800 --> 0:20:07.200 time to buy with two thousand eight and and and 0:20:07.400 --> 0:20:09.439 a lot of that, I mean going back to I 0:20:09.440 --> 0:20:11.800 think a very famous call made by the by Norway's 0:20:12.119 --> 0:20:14.920 major state fund is that you just you buy tech 0:20:14.960 --> 0:20:17.399 in two thousand eight and you do super well for 0:20:18.000 --> 0:20:20.879 I think up til now really and I'm wondering, but 0:20:21.000 --> 0:20:23.719 one of the biggest kind of tail winds for that 0:20:23.800 --> 0:20:26.919 trade was that Tech was really using a lot of 0:20:26.920 --> 0:20:29.480 the cash that they had in terms of acquisitions, which 0:20:29.520 --> 0:20:31.639 brings me back to the M and A story. You 0:20:31.720 --> 0:20:34.440 have so much cash on these tech balance sheets, they're 0:20:34.440 --> 0:20:37.080 not able to spend it because of the antitrust scrutiny, 0:20:37.200 --> 0:20:42.440 So how do you make any sense of that? So 0:20:43.119 --> 0:20:46.000 you brought up a couple of points. You're right. Antitrust 0:20:46.240 --> 0:20:51.280 is probably, in my view the biggest issue UH headwind 0:20:51.359 --> 0:20:54.600 issue that we have in M and A, or one 0:20:54.600 --> 0:20:57.960 of the biggest issues. Certainly obviously the economy being the 0:20:58.000 --> 0:21:02.600 other macroeconomic conditions obviously be being very important as it 0:21:02.640 --> 0:21:06.399 relates to UH tech. You know, tech buyers doing roll 0:21:06.480 --> 0:21:09.840 up strategies. I don't think that's stopping. We're talking about 0:21:09.920 --> 0:21:12.800 larger transactions now and as you do tuck ins, I 0:21:12.840 --> 0:21:14.720 mean you see it happen all the time, and they're 0:21:14.720 --> 0:21:17.600 continuing to do them now. Anti trust is the big issue, 0:21:18.160 --> 0:21:21.200 and that won't stop. In my view, and you're right, 0:21:21.320 --> 0:21:25.239 that was a great opportunity for success. And you're right 0:21:25.560 --> 0:21:28.480 two thousand and eight because it was a down year 0:21:28.560 --> 0:21:32.040 and it was a tough year obviously great recession. That 0:21:32.160 --> 0:21:34.919 was a great time to be a buyer. And I'm 0:21:34.960 --> 0:21:37.439 not suggesting it's not now a great time to be 0:21:37.480 --> 0:21:40.320 a buyer, but there are a lot of considerations. Mark, 0:21:40.359 --> 0:21:43.919 does it become a better time to be a buyer? Uh, 0:21:44.320 --> 0:21:49.000 in the remainder of rather into I mean, what's your 0:21:49.000 --> 0:21:53.800 call for this moving forward? So I think it's a 0:21:53.840 --> 0:21:56.399 good time. I think you have to be selective, and 0:21:56.840 --> 0:21:59.560 no one knows, uh, you know, are we in a 0:21:59.640 --> 0:22:02.640 recept shan or are we going to be in a recession? 0:22:02.760 --> 0:22:05.600 What's the demand profile gonna look like going forward? How 0:22:05.680 --> 0:22:07.879 business is going to perform? So far, earnings has been 0:22:07.920 --> 0:22:11.600 good for you two. You know, I'm bullish long term, 0:22:11.640 --> 0:22:14.320 and I don't know what long term means. So my 0:22:14.400 --> 0:22:17.560 attitude about buying is this is probably a pretty good 0:22:17.600 --> 0:22:21.119