Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Let's turn to private equity. The Consortium Bank Electronic Arts
Speaker 2: is set to add more than a dozen banks to
Speaker 2: its underwriting group after JP Morgan put up twenty billion
Speaker 2: dollars of debt to bankroll the leverage buyout. The banks
Speaker 2: are inline to share roughly five hundred million dollars in
Speaker 2: fees for arranging the financinc Joining us now a man
Speaker 2: who knows something about a leverage buyout, Steve Paluke of
Speaker 2: Being Capital. Steve's good to see us, so it could
Speaker 2: be a good morning. Let's reflect on your time. The
Speaker 2: largest leverage buyo ever before this one was HCA back
Speaker 2: in two thoy and sixty thousand and seven. There you
Speaker 2: were right there in the middle of it. Describe that
Speaker 2: moment and how it compares to what we're seeing play
Speaker 2: out now.
Speaker 1: Well, it's really interesting.
Speaker 3: I think that buyout was five billion equity and twenty
Speaker 3: seven billion dollars debt. This this buyout is much more equity,
Speaker 3: you know, kind of thirty billion of equity and twenty
Speaker 3: five twenty billion, may thirty five billion of equity. So
Speaker 3: the markets have changed to that extent that you can't
Speaker 3: leverage you much, but the ibadas a little less very
Speaker 3: quality sponsors, and JP Morgan.
Speaker 1: Is are very quality bank.
Speaker 3: So they did the deal because of the great growth
Speaker 3: in gaming and media and entertainment, and I think is
Speaker 3: a very solid company.
Speaker 2: You did the tremendously well out of HCA. It needs
Speaker 2: to be very very clear about that. But the timing
Speaker 2: of it is curious. It came right at the peak
Speaker 2: of credit and this is now too. Is that anything
Speaker 2: to be concerned about?
Speaker 3: You know, I'm less concerned about credit right now in
Speaker 3: terms of the private credit markets, because the private lenders
Speaker 3: actually are very good. The banks have been very good
Speaker 3: at JP Morgan, especially Bank of America, well run, well
Speaker 3: capitalized banks. And private credit is different than credit from
Speaker 3: banks because if it does go bad, you only write
Speaker 3: off the equity from people who put the equity in.
Speaker 3: It doesn't have a systemic multiplier effect. So I'm less
Speaker 3: concerned about private credit. What one more concerned about is
Speaker 3: the size of the national debt and how much interest
Speaker 3: we're spending on the national debt.
Speaker 1: It's really interesting if you go back to.
Speaker 3: When I got out of business school, there was a
Speaker 3: huge storm and drawing about the national debt passing one trillion.
Speaker 3: That's in nineteen eighty two, so it took two hundred
Speaker 3: and fifty years to have one trillion of national debt.
Speaker 3: In the last forty years, we now have thirty seven trillion,
Speaker 3: which is more than the gdpgbt's about thirty trillion, So
Speaker 3: that concerns me more In terms of the impact of
Speaker 3: the dollar interest rates, our interest from the government now
Speaker 3: is one of the highest expenditures. It's right up there
Speaker 3: with defense and healthcare. So that concerns me more than
Speaker 3: private credits.
Speaker 2: I st I could probably find you people who are
Speaker 2: consent back in the eighties two and then in the
Speaker 2: two thousands, and as we went through ten trillion, twenty
Speaker 2: trillion and kept going high, they were concerned all the
Speaker 2: way up. Yeah, unfortunately, say miment different.
Speaker 3: Well, I think I don't know if it is different,
Speaker 3: But in situations like this, it's always okay till it
Speaker 3: isn't okay, So you get used to you pass a trillion. Ever,
Speaker 3: Dirkson had a board up that was counting it up
Speaker 3: at that time and it passed a trillion. There was
Speaker 3: a huge outcry. Now it's ten trillion, and then twenty,
Speaker 3: then thirty. Train but at some point you've got to
Speaker 3: have some long term plan to pay that money back
Speaker 3: and get that deficit down because it's eating up huge
Speaker 3: amounts of the government budget. And as as as the
Speaker 3: interest rates roll over, you know, a lot of that
Speaker 3: is still financed in the old really low interest rates.
Speaker 3: They're going to have to refinance it at five percent,
Speaker 3: you know, four and a half percent, and then the
Speaker 3: number goes up again.
Speaker 4: Well, when you see what's going on Washington, I want
Speaker 4: to go back to your EA deal. It's not just
Speaker 4: the size and scope that got a ton of people's attention.
Speaker 4: There's concern in Washington given some of the players involved.
Speaker 4: Have you heard from politicians about that.
Speaker 3: I don't think there's been a lot of pushback on
Speaker 3: that and the deal. I think we'll be controlled by
Speaker 3: silver Lake, which is an American you know, fantastic private
Speaker 3: equity company.
Speaker 4: But with the Saudi PIF being involved, some people think
Speaker 4: Jared Kushner was brought in just to get you know,
Speaker 4: check government.
Speaker 2: Seal of approval.
Speaker 1: You know.
Speaker 3: Again, I think silver Lake's a fantastic firm and they're
Speaker 3: leading the charge there, and so I think there's really
Speaker 3: going to be no concern because they'll be calling the
Speaker 3: shots on the deal sink.
Speaker 2: If we started this conversation by comparing this dayo CI
Speaker 2: I was six, I seven. Have the pose of capital
Speaker 2: changed in the last twenty years.
Speaker 1: Yeah? Absolutely.
Speaker 3: You know, when I started out in the industry, there
Speaker 3: was only three or four firms doing this I think
Speaker 3: in general, and it was mostly USA. Now it's global.
Speaker 3: The fund sizes are up probably twenty times from when
Speaker 3: I started. And also you have sovereigns and bid in
Speaker 3: constitutional players partnering with private equity, so the dry powder
Speaker 3: is huge.
Speaker 2: Are there enough opportunities to go around?
Speaker 1: You know? You know I got asked that question in
Speaker 1: nineteen eighty nine.
Speaker 2: It's going to again, and.
Speaker 3: I feel like a broken record. A private equity I
Speaker 3: think is here to stay. The model has really evolved,
Speaker 3: so it really is huge value added to to transform companies,
Speaker 3: make them better, globalize them, build new products, and in
Speaker 3: an environment where you don't have to worry about quart
Speaker 3: of learning. So the model is a very good model,
Speaker 3: and it's only expanded that it's only gotten big and
Speaker 3: I think it'll meet There will be plenty of opportunities
Speaker 3: for these folks to invest money.
Speaker 2: Well, let's talk about the opportunities now for you and
Speaker 2: how your sport franchisees are going. Starting with Atlanta, Steve
Speaker 2: walked into the room with some Atlanta sneak as with
Speaker 2: the sponsor New Balance song. The relationship between you and
Speaker 2: New balants, Can you just describe what that's like at
Speaker 2: the moment?
Speaker 3: A fantastic A New Balance is a is kind of
Speaker 3: a fighting brand growing, taking a lot of share. They
Speaker 3: really like the Atalanta story because we have the same values.
Speaker 3: You know, we're kind of a fighting brand against your
Speaker 3: the wanted ac one team that you support, and so
Speaker 3: it was kind of a matchmate in heaven. The New
Speaker 3: Balance is very excited about it. We're excited about it.
Speaker 3: We've just named our stadium New Balance Arena. I think
Speaker 3: it's the first arena that New Balance is named, and
Speaker 3: we're very proud to be associated with New Balance. It's
Speaker 3: a family company, you know, the Package Group is a
Speaker 3: family company in the Percossis in Italy, your family companies,
Speaker 3: So the three families have come together and hopefully take
Speaker 3: to the next level.
Speaker 2: You've done a tremendous job with the same in a franchise.
Speaker 2: Can you just describe the opportunities now that exist in
Speaker 2: this sports world at a time where some people are
Speaker 2: pushing back against valuations.
Speaker 3: Well, no question valuations or record levels. Why is that
Speaker 3: is because sports is now the only thing left that
Speaker 3: aggregates huge audiences globally. And there's been a technology change
Speaker 3: where when I lived in Holland And in the nineteen seventies,
Speaker 3: you would only get sports scores three days later from
Speaker 3: an international tribune and you could watch anything.
Speaker 1: Now you can watch any team globally.
Speaker 3: So fans are counted in the billions instead of the
Speaker 3: tens of thousands where they used to be thirty years ago.
Speaker 3: So I think sports still has upside because advertisers, you
Speaker 3: don't want to reach the globe, and that's the way
Speaker 3: to do it.
Speaker 2: As you look at the sports world and it's pretty broad,
Speaker 2: where do you see the best opportunity right now? Because
Speaker 2: your name's been linked to a team in the WNBA,
Speaker 2: I know you wanted to bring a team up to Boston.
Speaker 2: Is that where you're looking stale or is it outsewear?
Speaker 3: Well, we're looking at many opportunities. I think the WNBA
Speaker 3: is a great opportunity women's sports and general women's soccer
Speaker 3: in the USA and globally is growing. The NFL is
Speaker 3: the market properties. I think they had record ratings and
Speaker 3: record advertising on the NFL. So again, I think sports
Speaker 3: as a category is really a growth asset. And as
Speaker 3: you have this battle between old media and new media,
Speaker 3: it's existential for them and they're battling over these properties
Speaker 3: that get all the eyeballs in.
Speaker 1: So I think that bodes well for all the leagues.
Speaker 4: John mentioned the w A Connecticut team. Do you think
Speaker 4: that there potentially could be a future for you and
Speaker 4: that team?
Speaker 1: That's something clear.
Speaker 3: We've we've kind of stood down for now and uh
Speaker 3: and and we're going to abide by whatever the NBA
Speaker 3: wants to do with the team.
Speaker 1: I think it's it's very exciting.
Speaker 3: The ratings are huge for w n b A, and
Speaker 3: I think it's great that all all Americans are following
Speaker 3: that sport now and it's going to it's going to
Speaker 3: really take off, and the NBA has done a great
Speaker 3: job with that.
Speaker 2: You've done a great job, Staf. It's always going to
Speaker 2: catch up with you. What a career if those like
Speaker 2: you have in the best of times.
Speaker 3: Now, you know, I've been very fortunate, you know, coming
Speaker 3: my grandfather came from Italy on a boat with one suitcase,
Speaker 3: and we're in a shoe factory here in New York
Speaker 3: in the Bronx for eight dollars a week. So I
Speaker 3: would say America is a great place coming coming from
Speaker 3: from that, and and I've loved the homecoming, coming back
Speaker 3: to Italy with Atalanta. I get off the plane and
Speaker 3: I love it because everyone looks like me there.
Speaker 1: We talked, I haven't lost my Italian hedge.
Speaker 2: We've talked extensively about this in the past together offline,
Speaker 2: and I'm very proud of you. I never think you've
Speaker 2: done Steve.
Speaker 1: Thank you, appreciate it.
Speaker 2: Thank you, Steve Patiuca of Been Capital