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Speaker 1: Lazard's global head of m and A. Mark McMaster is

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Speaker 1: with me. Now. You know, it's interesting, Mark, because you

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Speaker 1: did see for a while there borrowing cost being higher

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Speaker 1: really impacting a lot of markets. But it shook off

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Speaker 1: those fears this year with intense borrowing for deals. Do

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Speaker 1: you think that continues with expectations changing around rates.

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Speaker 2: I think people will continue to borrow the new deals.

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Speaker 2: But one of the things we're seeing a lot of

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Speaker 2: is the comeback of all stock transactions. In twenty two

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Speaker 2: they were about ten percent of total volume.

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Speaker 3: Today they're over a third.

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Speaker 2: And if you look at the biggest deals that are

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Speaker 2: done so far this year, more than half of them

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Speaker 2: are all stock combinations. So it's a way to achieve

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Speaker 2: a combination without levering up, where you can share the

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Speaker 2: synergies proportionately between shareholder basis, and it's a more effective

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Speaker 2: cost of borrowing for many corporations.

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Speaker 1: It's interesting you look at a market like today and on

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Speaker 1: one hand you feel volatility could be bad for deals.

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Speaker 1: On the other hand, lower stock prices could be pretty

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Speaker 1: decent for deals. Do you look at it that way?

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Speaker 3: I do. Over the long term, it's been quite a run.

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Speaker 2: The s and ps still at are near all time highs,

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Speaker 2: and so people's currency is a very valuable commodity in

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Speaker 2: doing transactions today.

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Speaker 1: Well, one big question mark has been antitrust as well.

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Speaker 1: On one hand, you've seen deal volumes jump back meaningfully

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Speaker 1: even with the threat overhanging large scale deals. Do you

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Speaker 1: think that the types of deals we'll see this year

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Speaker 1: have to be smaller to avoid that kind of scrutiny, Well,

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Speaker 1: they have.

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Speaker 3: To be well planned.

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Speaker 2: So I think right now the participants understand the rules

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Speaker 2: for the anti trust and I think if the facts

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Speaker 2: are on your side and you have high level of confidence,

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Speaker 2: you can pursue and get a deal done. So I

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Speaker 2: think the anti trust regime right now is stable, and

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Speaker 2: I think participants know kind of that they have to

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Speaker 2: do a bunch of the work up front to get

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Speaker 2: a deal done properly.

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Speaker 1: Well, it's interesting because the question I was embedded in

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Speaker 1: there too was also about size. Do you think that

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Speaker 1: twenty twenty four, by the end of it will be

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Speaker 1: defined by the mega merger or something else?

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Speaker 2: Probably something else. It's too early to say. You know,

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Speaker 2: we're only a couple of months in. There are an

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Speaker 2: awful lot of big deals, as I mentioned earlier so

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Speaker 2: far in twenty four and I think big deals still

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Speaker 2: can get done. They'll face antitrust scrutiny, but as you know,

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Speaker 2: there's been a couple of cases that have given the

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Speaker 2: issuers and the transactors some confidence that they can get

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Speaker 2: things done today.

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Speaker 1: Well, the other thing you've been working on a lot

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Speaker 1: at Lazard is the closeness to the private capital industry,

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Speaker 1: both on the financing side as well as to just

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Speaker 1: regular way private equity deals. If there's any case to

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Speaker 1: be made for deals that are not mega deals, do

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Speaker 1: you think private equity can start playing a bigger role here.

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Speaker 2: Well, private equity is in a bit of a long

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Speaker 2: jem still today, right So there's a ton of portfolio

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Speaker 2: companies that still need to be monetized, and there's an

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Speaker 2: awful lot of firepower that has not yet been deployed.

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Speaker 2: So right now, the private credit markets are working well,

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Speaker 2: but the traditional credit markets are just starting to open up.

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Speaker 2: So I think if we get a rate cut or two,

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Speaker 2: and the debate is shifted not from our rate's going

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Speaker 2: to go up, but when are they going to go down?

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Speaker 3: And buy how much?

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Speaker 2: So a couple of rate cuts, I think we start

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Speaker 2: to see the traditional financing markets competing with private credit,

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Speaker 2: and I think that will open up the private equity

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Speaker 2: you log jam.

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Speaker 1: Now, that's pretty fascinating because does that happen whether you

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Speaker 1: see one rate cut or.

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Speaker 3: Three rate cuts this year? You think? I think it

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Speaker 3: happens after a rate cut or two.

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Speaker 1: So you think about the role of private equity, and

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Speaker 1: it's not just this idea that they have all this

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Speaker 1: dry powder. You've seen a lot of companies look to

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Speaker 1: do spin offs or exit certain businesses kind of in

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Speaker 1: this more challenging economic environment.

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Speaker 3: Does that continue?

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Speaker 2: I think simplification will continue. I think it's a trend.

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Speaker 2: It's been going on for a long time. I think

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Speaker 2: investors really prefer pure place for lots of reasons, and

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Speaker 2: so you're seeing that the remaining conglomerates continue to simplify.

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Speaker 2: Right gees announcements, three M's announcements. I think that trend continues.

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Speaker 1: How much can it really continue? You kind of mentioned

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Speaker 1: some names that we're already looking to it as well.

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Speaker 1: Do you think you'll see some non traditional players start

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Speaker 1: to enter the market when it comes to spinoffs?

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Speaker 3: Think, I think it will continue for a while.

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Speaker 2: I think there's you can always become more focused, more

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Speaker 2: of a pure play, and I think when you think

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Speaker 2: about the acquisition side of things, that's where you want

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Speaker 2: to grow, right, You want to grow in your core competencies.

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Speaker 3: So I think it will continue for a while.

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Speaker 1: The other thing you mentioned here about all stock deals

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Speaker 1: is that it implies many public companies doing more and

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Speaker 1: more deals, starting to use their currency. How by and

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Speaker 1: large have investors been rewarding those deals? Do you find

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Speaker 1: that more often that they're more receptive to them.

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Speaker 2: I think investors are receptive to deals that make strategic sense,

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Speaker 2: where the price makes sense and the synergies are shared

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Speaker 2: kind of proportionately between buyer and seller.

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Speaker 3: So as long as it.

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Speaker 2: Makes sense and your structure it properly, investors will perceive

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Speaker 2: it well. I do think in this environment, an all

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Speaker 2: stock deal has the advantage of not leveraging up the

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Speaker 2: balance sheet, and I think investors are rewarding that.

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Speaker 1: Now, let's talk about sectors as well. Where do you

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Speaker 1: think that there's the most opportunity right now as you

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Speaker 1: kind of close out this year, we have.

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Speaker 3: Three quarters left.

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Speaker 2: So last year and this year, the big sectors have

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Speaker 2: been technology, health care industrials, and energy.

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Speaker 3: Broadly defined this sector.

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Speaker 2: I think, in addition to those four which are still

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Speaker 2: quite busy, we're seeing an increase in consumer and we're

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Speaker 2: seeing an increase in financial institutions, and so I think

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Speaker 2: those sectors will be more active this year.

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Speaker 3: Than they were last year. What do you think is

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Speaker 3: driving that?

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Speaker 2: Just fundamentally, it's growth, right, So investors require growth, and

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Speaker 2: whether it's organic growth or inorganic growth, investors are going

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Speaker 2: to reward it as long as it's consistent and management

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Speaker 2: teams are perceived as being very good at it.

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Speaker 1: Is there something defensive about this space as well? You

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Speaker 1: think about the consumer and they're finally having some troubles

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Speaker 1: as you see in the market so far, do you

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Speaker 1: think that companies are looking to bulk up to get

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Speaker 1: ahead of that.

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Speaker 3: I'm not seeing that yet.

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Speaker 2: I'm not seeing the defensive nature, so I'll stay tuned

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Speaker 2: to it.

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Speaker 1: When you think about those types of deals, do you

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Speaker 1: think that they're mostly strategic or is that where private

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Speaker 1: equity steps in as well?

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Speaker 3: It's going to be both. It's going to be both.

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Speaker 2: As the bigger companies simplify pieces come off, private equity

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Speaker 2: can step in and compete.

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Speaker 3: With other strategics.

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Speaker 2: But there will be I still think a lot of

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Speaker 2: strategic to strategic combinations.

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Speaker 1: Ring it's behind the process. Now you have strategic buyers,

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Speaker 1: and finally, it looks like maybe after a rate cut,

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Speaker 1: of devid equity buyers also coming into the market. When

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Speaker 1: you're in a process. How competitive are deals becoming now?

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Speaker 1: Do you find that these auction processes are finally coming

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Speaker 1: back to the surface in meaningful ways?

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Speaker 2: I think right now private equity is still very disciplined,

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Speaker 2: and it's very hard to get through a commitment committee

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Speaker 2: on a private equity deal, and particularly if they're fundraising.

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Speaker 2: I think right now private equity is more focused on

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Speaker 2: add ons to their existing portfolio companies as a way

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Speaker 2: to bring the multiples down, and are a little bit

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Speaker 2: more hesitant into another platform acquisition.

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Speaker 3: So, yeah, the auctions are competitive.

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Speaker 2: People are paying big prices, but it's not like it

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Speaker 2: was in twenty one yet. I think we're steadily progressing

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Speaker 2: back towards that level.

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Speaker 1: How much is activism playing a role here in pushing

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Speaker 1: some of these transitions to the surface.

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Speaker 3: It's a great question.

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Speaker 2: Activism is as busy as it has ever been, and

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Speaker 2: M and A is a theme and over half the campaigns,

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Speaker 2: and that's not always pro em and A. Sometimes it's

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Speaker 2: why did you do that deal and let's unwind it.

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Speaker 2: But activism is one of the drivers of M and A.

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Speaker 1: As we look forward, Mark, we have to leave it

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Speaker 1: there that thank you so much for your time. That

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Speaker 1: is Mark McMaster, Lizard's global head of Murders and Acquisitions,