WEBVTT - Bloomberg Intelligence: Hyatt CEO Sees Positive Trends 0:00:02.920 --> 0:00:10.840 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.880 --> 0:00:15.040 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:15.080 --> 0:00:17.439 Eastern on Apple Car playing Android. 0:00:17.040 --> 0:00:18.759 Auto with the Bloomberg Business app. 0:00:18.800 --> 0:00:22.000 Listen on demand wherever you get your podcasts, or watch 0:00:22.079 --> 0:00:24.040 us live on YouTube. 0:00:24.560 --> 0:00:26.960 Let's talk us a little c suite conversation here. We 0:00:27.000 --> 0:00:30.159 can do that with the hotel business. Mark Hopplomacian joins us. 0:00:30.200 --> 0:00:33.760 He's a president and chief executive officer of Hyatt Hotels, 0:00:34.280 --> 0:00:37.680 joining us via zoom. Hey, Mark, thanks so much for 0:00:37.760 --> 0:00:39.880 joining us here. I'm looking at your stock here, fifty 0:00:39.880 --> 0:00:42.479 two week high. For those that don't know, H is 0:00:42.479 --> 0:00:43.919 the symbol. It's cool to get that one of those 0:00:43.960 --> 0:00:46.879 single letter symbols there. That's always pretty cool for us 0:00:46.880 --> 0:00:48.600 Wall Street, Folcus. I've got a market cap at fifteen 0:00:48.640 --> 0:00:51.279 point seven billion, stocks up about three tens a one 0:00:51.320 --> 0:00:54.160 percent today. Mark, talk to us about your recent earnings 0:00:54.440 --> 0:00:56.640 and kind of what was the messaging you needed to 0:00:56.640 --> 0:01:00.160 get across to your shareholders. 0:01:00.200 --> 0:01:01.560 Of all, it's great to be back with you all, 0:01:01.760 --> 0:01:05.200 and thanks for having me. I think that the the 0:01:05.920 --> 0:01:09.200 clear message was really centered around the fact that the 0:01:09.240 --> 0:01:14.720 transformation of the company to asset lighter platform has now 0:01:15.240 --> 0:01:17.200 shown up in the numbers in a very material way. 0:01:17.640 --> 0:01:19.920 We had the highest pre cash flow that in the 0:01:19.920 --> 0:01:26.679 company's history. We also had the mix of our asset 0:01:26.720 --> 0:01:29.480 light earnings to our total earnings went up to seventy 0:01:29.560 --> 0:01:32.039 six percent five years ago. 0:01:32.160 --> 0:01:34.840 That was in the in the mid forties. 0:01:34.920 --> 0:01:37.959 Hey market, So, did describe for us what your asset 0:01:38.000 --> 0:01:40.680 light strategy is? Is that relying more on franchisease. 0:01:41.840 --> 0:01:44.240 Yeah, so it's not really I wouldn't call it an 0:01:44.280 --> 0:01:46.600 asset light strategy. I would call it an asset light program. 0:01:46.640 --> 0:01:48.920 Where we were selling down. We had we had two 0:01:48.960 --> 0:01:51.360 major drivers of our of our of our earnings. One 0:01:51.440 --> 0:01:53.760 was from real estate that we owned hotels, and the 0:01:53.800 --> 0:01:57.840 other ones from management franchising hotels across the world. We're 0:01:57.840 --> 0:02:01.640 primarily a management business, not a franchise businesusiness, but that 0:02:01.720 --> 0:02:04.960 those are the two businesses. So as we sell down 0:02:05.480 --> 0:02:10.320 real estate, the proportion that's coming from real estate sourced 0:02:10.400 --> 0:02:15.040 earnings has been dropping. We've concurrently reinvested in buying new 0:02:15.040 --> 0:02:18.119 platforms and new brands over the last five years, and 0:02:18.480 --> 0:02:21.840 that has driven up our management and franchising fees. At 0:02:21.880 --> 0:02:26.520 the same time, so the mix has shifted to much 0:02:26.560 --> 0:02:30.760 more in the management and franchise feed driven business, which 0:02:30.880 --> 0:02:35.560 is very low capital intensivity and high margin and high 0:02:35.680 --> 0:02:39.160 free cash floats conversion. So that was probably the key message. 0:02:39.240 --> 0:02:42.040 The other thing that we did is we simplified our 0:02:42.120 --> 0:02:45.680 financial presentation because we have a business that's a subscription 0:02:45.800 --> 0:02:49.839 model membership business called Unlimited Ucation Club, and we sold 0:02:49.880 --> 0:02:52.040 the majority interest in that business to a third party 0:02:52.360 --> 0:02:56.239 which helped us simplify how we report our earnings and 0:02:56.320 --> 0:03:00.040 that was very well received by investors. 0:03:00.000 --> 0:03:02.400 And Mark, that's you and the c suite managing all 0:03:02.440 --> 0:03:05.440 of that. What about the demand side of the business, 0:03:05.680 --> 0:03:07.920 What kind of pricing power do you have per room? 0:03:08.040 --> 0:03:09.960 And what's the demand situation. 0:03:09.720 --> 0:03:15.639 Like actually demand, So we think about three different demand drivers. 0:03:15.680 --> 0:03:18.800 One is leisure, which has been the leader of the 0:03:18.840 --> 0:03:23.560 recovery through post COVID period. We think about group business, 0:03:23.600 --> 0:03:27.000 which is big meetings and conventions and things like that, 0:03:27.320 --> 0:03:30.920 and we also have business travel individual business travel. All 0:03:30.960 --> 0:03:38.280 three are showing signs of great momentum and positive outlooks. 0:03:38.280 --> 0:03:42.000 So starting with leisure, in the first quarter of this year, 0:03:42.320 --> 0:03:46.880 our pace meeting our bookings are up eleven percent for 0:03:47.000 --> 0:03:49.120 our all inclusive resorts in the Pervian and. 0:03:50.640 --> 0:03:56.360 Also up for our our resorts in the Americas. 0:03:57.640 --> 0:04:01.800 But leisure travel has been really really solid in China. 0:04:01.920 --> 0:04:04.400 We had a record year for Lunar in New Year. 0:04:05.160 --> 0:04:09.360 The spending amongst Chinese, both inside of China and other 0:04:09.400 --> 0:04:11.560 destinations in Asia was at them all time high. So 0:04:11.600 --> 0:04:16.360 that's leisure in group. Our pace into this year, that 0:04:16.440 --> 0:04:20.440 is forward bookings are up eight percent, and so we're 0:04:20.480 --> 0:04:24.520 looking at another solid year of growth of growth in meetings, 0:04:25.000 --> 0:04:28.839 and I think corporations are increasingly resolved to make sure 0:04:28.960 --> 0:04:31.960 that they prioritize those meetings. And then on business transient 0:04:32.040 --> 0:04:37.560 the US is lagging, but the overall business transient category 0:04:37.640 --> 0:04:41.480 demand around the world is about seven percent the low 0:04:41.480 --> 0:04:44.160 where it was pre pandemic, So we're getting closer and 0:04:44.200 --> 0:04:47.359 closer to being a parody. Europe is fully recovered, and 0:04:47.400 --> 0:04:50.080 then some China is fully recovered, and then some the 0:04:50.200 --> 0:04:53.919 United States is still lagging, and we're seeing signs of 0:04:54.680 --> 0:04:58.360 positive signs of business transient travel increasing. So I would 0:04:58.400 --> 0:05:02.359 say across all three major category we're seeing positive trends 0:05:02.360 --> 0:05:04.080 into twenty four mark. 0:05:04.080 --> 0:05:05.560 Could you talked to us about m and A and 0:05:06.000 --> 0:05:09.040 kind of growth via acquisition. How does that figure into 0:05:09.160 --> 0:05:12.000 your growth plans? What are you guys messaging to the 0:05:12.000 --> 0:05:14.520 street about your willingness to engage in em ande because 0:05:14.520 --> 0:05:16.040 I know you had to buy out recently of the 0:05:16.120 --> 0:05:17.440 Apple Leisure Group. 0:05:17.520 --> 0:05:19.600 I want to see kind of your appetite is going forward. 0:05:20.360 --> 0:05:24.840 Yeah, So over the past five years, we've invested about 0:05:24.880 --> 0:05:28.640 three point eight billion dollars in acquisitions, the biggest one 0:05:28.720 --> 0:05:31.760 being Apple Leisure Group at two point seven billion, and 0:05:32.360 --> 0:05:35.120 it's been tremendously beneficial to us because we've been able 0:05:35.120 --> 0:05:38.280 to expand our customer base in the most in the 0:05:38.320 --> 0:05:41.679 highest growth and most relevant to US categories, which is leisure, 0:05:41.720 --> 0:05:45.719 lifestyle and luxury. And so we've really done this in 0:05:45.760 --> 0:05:48.640 a very deliberate way to move the company in that direction. 0:05:49.600 --> 0:05:52.000 In the fourth quarter, I think we had fifty seven 0:05:52.000 --> 0:05:54.320 percent of our total rooms revenue around the world was 0:05:54.400 --> 0:05:58.520 leisure focused, which is up twenty points from the mid 0:05:58.560 --> 0:06:02.000 thirties to the mid fifties pre pandemics on now, so 0:06:02.040 --> 0:06:06.920 that the mix in the company is tremendously shifted, but 0:06:06.960 --> 0:06:12.159 they also been very profitable and high value acquisitions. The 0:06:12.400 --> 0:06:15.599 fees per room that we are earning today are materially 0:06:15.680 --> 0:06:17.600 higher than they were five years ago before we made 0:06:17.640 --> 0:06:21.599 these acquisitions and evolved the company. Even as we have 0:06:21.680 --> 0:06:27.360 grown our select service brands, so we are expanding in 0:06:27.640 --> 0:06:30.920 lower price points, but our overall feed growth per room 0:06:31.360 --> 0:06:35.919 has been growing, which is really I think part of 0:06:35.920 --> 0:06:38.880 the equation of actually driving share holder value on. 0:06:38.800 --> 0:06:40.040 An accelerated basis. 0:06:40.279 --> 0:06:42.720 In terms of our outbook, I think there will be 0:06:42.720 --> 0:06:45.920 more opportunities for MNA in the future, but probably smaller scale. 0:06:46.160 --> 0:06:48.680 Mark Paul and I talked by the story yesterday for 0:06:48.720 --> 0:06:53.520 the Journal reported that hotel parking fees are spiking because 0:06:53.720 --> 0:06:56.360 of the fact that you know, you guys that on 0:06:56.400 --> 0:06:59.640 hotels have to pay more and rent interest rates have increased. 0:06:59.680 --> 0:07:02.160 Maybe there's a demand issue in certain pockets. You got 0:07:02.200 --> 0:07:05.800 to increase prices where you can talk to me about 0:07:05.839 --> 0:07:08.160 how expensive it is to run your business, like where 0:07:08.200 --> 0:07:09.239 a cost coming down? 0:07:09.320 --> 0:07:10.560 Where cost going up? 0:07:11.840 --> 0:07:13.840 You know, I think the primary look, first of all, 0:07:14.240 --> 0:07:16.240 let's start with the biggest cost category, which. 0:07:16.120 --> 0:07:18.680 Is people, yeah, at our hotels and in. 0:07:18.640 --> 0:07:22.120 Twenty twenty one non union markets, which is primarily in 0:07:22.120 --> 0:07:25.120 the South, the Sun Belt, the smile of the United States. 0:07:25.480 --> 0:07:28.920 I think our wage rates went up by twenty percent 0:07:29.800 --> 0:07:32.800 over the course of that year, and that started to 0:07:32.920 --> 0:07:36.480 mitigate or a millliarrate in twenty twenty two and twenty 0:07:36.520 --> 0:07:42.400 twenty three, but we experienced a massively acute situation in 0:07:42.480 --> 0:07:43.960 terms of supply of labor. 0:07:44.400 --> 0:07:47.600 That's really that's evened out. We were in the mid teams. 0:07:48.080 --> 0:07:50.200 That's even out in that because we also talked about 0:07:50.240 --> 0:07:54.440 didn't we paul about cleaning services like not staffing housekeeping 0:07:54.480 --> 0:07:55.880 because it just can't find the workers. 0:07:55.920 --> 0:07:58.520 So do you feel like you're at the right spot? 0:08:00.480 --> 0:08:02.640 I would say that there are pockets where we still 0:08:02.680 --> 0:08:06.360 have shortages, and I think part of that has to 0:08:06.400 --> 0:08:10.880 do with the nature of the workforce at this point. 0:08:10.920 --> 0:08:17.320 So we've got a lot of the byproduct of not 0:08:17.440 --> 0:08:23.600 having a really advanced immigration policy in the United States 0:08:23.680 --> 0:08:28.760 and h t B visa program, is that for at times, 0:08:28.880 --> 0:08:32.560 especially over the summer, where you have peak demand, we 0:08:32.640 --> 0:08:35.640 don't have the right type type of labor that's willing 0:08:35.679 --> 0:08:38.920 to take those jobs and uh and be happy to 0:08:39.120 --> 0:08:42.480 start their careers in those jobs. So I think this 0:08:43.200 --> 0:08:45.880 they go together. A lot of the a lot of 0:08:45.880 --> 0:08:48.840 the h t B people that come in on an 0:08:48.960 --> 0:08:51.559 hub visa which is a temporary work visa they come 0:08:51.640 --> 0:08:57.280 and they leave. Or the incidence of of immigration that 0:08:57.360 --> 0:09:00.800 allows us to hire people who are coming in into 0:09:00.840 --> 0:09:02.880 the workforce in the United States for the first time 0:09:03.360 --> 0:09:07.880 has been has been under some pressure now. Having said that, overall, 0:09:07.960 --> 0:09:10.719 our vacancy rates have gone from mid teens to mid 0:09:10.760 --> 0:09:14.840 single digits, so down ten points, which is extraordinary, and 0:09:14.880 --> 0:09:18.160 that's over the last eighteen months. So we are having 0:09:18.200 --> 0:09:21.200 a better time finding labor, but there are definitely pockets 0:09:21.200 --> 0:09:22.520 of constraints. 0:09:23.240 --> 0:09:24.920 Yep, hear that from a lot of folks in the 0:09:24.920 --> 0:09:25.600 service business. 0:09:25.679 --> 0:09:28.000 Hey, Mark, thanks so much for joining us, Mark Hopplomasian, 0:09:28.240 --> 0:09:31.160 he's a president and chief executive officer at Hyatt Hotels, 0:09:31.200 --> 0:09:35.360 joining us from Chicago, Illinois via zoom. The company stock 0:09:36.040 --> 0:09:40.280 h is the ticker all time high today. So how 0:09:40.320 --> 0:09:43.600 about that they had some pretty solid numbers recovering from 0:09:43.600 --> 0:09:45.360 the pandemic. Look like we see a lot of other 0:09:45.679 --> 0:09:47.080 entertainment and leisure spaces. 0:09:48.679 --> 0:09:52.559 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:09:52.640 --> 0:09:55.559 weekdays at ten am Eastern on applecar. 0:09:55.160 --> 0:09:57.680 Play and Android Otto with the Bloomberg Business. 0:09:58.040 --> 0:10:00.720 You can also listen live on Amazon and Alexa from 0:10:00.760 --> 0:10:04.520 our flagship New York station. Just say Alexa playing Bloomberg 0:10:04.559 --> 0:10:05.640 eleven thirty. 0:10:06.400 --> 0:10:09.520 All right, ma, go in the terminal. Then I click 0:10:09.600 --> 0:10:11.719 on time series and I go, got ten years. And 0:10:11.800 --> 0:10:14.120 I just look at the graph of M and A activity, 0:10:14.120 --> 0:10:17.160 both in terms of dollar volume and number of deals. 0:10:17.640 --> 0:10:20.680 And man, really, since like I don't know, mid twenty 0:10:20.720 --> 0:10:23.480 twenty two, there's been nothing going on in the MNA world. 0:10:23.600 --> 0:10:25.320 My M and A banker buddies, I don't know what 0:10:25.320 --> 0:10:27.360 they're living on these days. But let's check and see 0:10:27.360 --> 0:10:29.079 where we are on the M and A space kind 0:10:29.120 --> 0:10:30.800 of where we can be going from here. I guess 0:10:30.800 --> 0:10:32.920 that's what happens when rates go up five hundred basis points. 0:10:33.000 --> 0:10:35.080 Ted Smith joins us. He's co founder and president of 0:10:35.200 --> 0:10:38.480 Union Square Advisors, joining us here in our Bloomberg Interactive 0:10:38.480 --> 0:10:41.200 Broker studio. So Ted, M and A activity, it's been 0:10:41.240 --> 0:10:44.120 a little fallow over the last I don't know, eighteen 0:10:44.160 --> 0:10:44.640 months or so. 0:10:44.880 --> 0:10:46.960 What are you guys seeing out there in terms of activity. 0:10:47.040 --> 0:10:48.720 We're starting to finally see a little bit of a 0:10:48.720 --> 0:10:51.000 thought out there, Paul. I want to be careful not 0:10:51.040 --> 0:10:54.640 to suggest that it's getting overcooked. Anytime soon, but starting 0:10:54.640 --> 0:10:58.400 to see the number of deals both and the quality 0:10:58.400 --> 0:11:01.840 of deals start to come back. Strategical quirers are saying 0:11:01.880 --> 0:11:03.520 they've kind of come out of their funk. They're ready 0:11:03.520 --> 0:11:05.200 to do things again where they hadn't been to your 0:11:05.240 --> 0:11:07.720 point for the last twelve to eighteen months. And private 0:11:07.720 --> 0:11:10.440 equity firms, which in technology where we apply our trade 0:11:10.480 --> 0:11:12.640 are so important, have a lot of capital to put 0:11:12.640 --> 0:11:14.679 to work, so they're anxious to Was. 0:11:14.600 --> 0:11:16.840 It just interest rates going up that everybody just step 0:11:16.880 --> 0:11:19.120 back or is it global macro? What kind of caused 0:11:19.120 --> 0:11:21.280 people to step back here? Because when I think about 0:11:21.360 --> 0:11:23.120 M and A, I think I have to have a 0:11:23.160 --> 0:11:25.600 board and a c suite that has confidence in their 0:11:25.640 --> 0:11:27.000 business to go out and make. 0:11:26.880 --> 0:11:29.120 That kind of investment right. So on the strategic side, 0:11:29.160 --> 0:11:30.720 I think it was more macro. It was like, we 0:11:30.760 --> 0:11:32.800 don't know enough about where our business is going right 0:11:32.840 --> 0:11:34.880 now that we can take a risk on another business. 0:11:35.600 --> 0:11:37.880 I think in private equity land it was definitely, at 0:11:37.960 --> 0:11:40.200 least in part by interest rates, And it was also 0:11:40.280 --> 0:11:43.880 the fact that because even to your point in early 0:11:43.920 --> 0:11:46.000 twenty twenty two, there hadn't been a lot of capital 0:11:46.040 --> 0:11:49.120 returned to their limited partners, and so for every dollar 0:11:49.160 --> 0:11:51.160 that they're investing, they're also thinking should I be giving 0:11:51.160 --> 0:11:52.599 that back to my limiteds And so there's been a 0:11:52.640 --> 0:11:54.920 lot of tension in that part of the world. 0:11:55.240 --> 0:11:58.199 So I know tech might be your space, but just. 0:12:00.240 --> 0:12:03.360 Person so, I'm really interested in what's happening with Exon 0:12:03.600 --> 0:12:06.440 and Seinook trying to get in the middle of the 0:12:06.480 --> 0:12:11.440 deal between Chevron and hess And the broad question is like, 0:12:12.000 --> 0:12:14.880 are we going to see weird territorial fights like this 0:12:15.080 --> 0:12:18.240 in different sectors, where like one big company to stop 0:12:18.280 --> 0:12:20.440 another big company from buying a smaller company. 0:12:20.840 --> 0:12:21.520 Is that normal. 0:12:22.200 --> 0:12:24.040 I'm not sure that it's normal, but it's certainly not 0:12:24.160 --> 0:12:28.400 unheard of. And I think we think and again, in tech, 0:12:28.800 --> 0:12:31.400 we see a lot of semi normal or even abnormal 0:12:31.400 --> 0:12:35.400 potential buyers who see buying into the tech landscape as 0:12:35.440 --> 0:12:38.200 being something that will help increase their growth, increase their margins, 0:12:38.240 --> 0:12:41.160 put them into exposure of a sector that they previously 0:12:41.200 --> 0:12:43.760 had not been. So I think we'll see some more 0:12:43.800 --> 0:12:45.920 of that in tech, but more generally, to your question, 0:12:46.240 --> 0:12:48.560 I'm certainly no expert on the energy sector, but I 0:12:48.559 --> 0:12:50.440 think this is an environment where if you see that 0:12:50.480 --> 0:12:52.880 smaller company that can really make a difference in your 0:12:52.920 --> 0:12:57.760 business and accelerate intor granted growth. Buyers are not afraid 0:12:57.760 --> 0:13:00.200 to mix it up at this point because they've been 0:13:00.240 --> 0:13:01.559 on the sidelines for a while and they need to 0:13:01.559 --> 0:13:02.000 get back in. 0:13:02.400 --> 0:13:05.000 If I go to sand Hill Road with a really 0:13:05.000 --> 0:13:07.280 good idea, can I find any money? Will? 0:13:07.320 --> 0:13:07.839 They will? 0:13:07.880 --> 0:13:09.160 They invest in my company? 0:13:09.280 --> 0:13:09.680 They will? 0:13:10.320 --> 0:13:12.920 Valuations are obviously down from the peak in twenty twenty one. 0:13:13.760 --> 0:13:15.880 You're gonna ask a lot of questions about what's your 0:13:15.880 --> 0:13:17.079 AI strategy? 0:13:17.640 --> 0:13:19.680 You know, where where exactly they got to saw something 0:13:19.720 --> 0:13:19.880 for it? 0:13:19.960 --> 0:13:20.080 Right? 0:13:20.200 --> 0:13:20.560 Exactly? 0:13:20.600 --> 0:13:23.400 Where are you going from here? The capital is available, 0:13:23.960 --> 0:13:27.080 but it is certainly more limited than it was two 0:13:27.120 --> 0:13:31.319 years ago and before that. Investors are being much more 0:13:31.640 --> 0:13:34.280 diligent about what they're willing to put capital to work in. 0:13:34.360 --> 0:13:37.480 And again, AI is obviously hot. That's blinding glimpse of 0:13:37.480 --> 0:13:38.480 the obvious for your audience. 0:13:39.360 --> 0:13:40.720 But what's different? 0:13:40.800 --> 0:13:42.839 I think, can I compare this, because I've been doing 0:13:42.840 --> 0:13:44.320 this for a long time, I compare this to the 0:13:44.360 --> 0:13:48.280 you know, the dot com era. Investors got to the 0:13:48.320 --> 0:13:51.840 point really quickly where it wasn't just about it's AI, 0:13:52.080 --> 0:13:55.240 it's what's the defensible business model, what's the real enterprise 0:13:55.360 --> 0:13:56.960 use case and how are you going to make money 0:13:56.960 --> 0:13:59.840 with it? That came so much faster with AI than 0:13:59.880 --> 0:14:01.480 it did in the dot com era, and that's what 0:14:01.520 --> 0:14:02.839 you're seeing on Santo Road. 0:14:02.840 --> 0:14:04.480 Now, show me a full business plan that's going to 0:14:04.520 --> 0:14:04.959 make money. 0:14:05.120 --> 0:14:07.480 Well, how are valuations? Do you think that we're getting 0:14:07.480 --> 0:14:11.240 overpaid things getting overpaid to be bought? Like, how hard 0:14:11.280 --> 0:14:12.520 is it to come to price. 0:14:13.000 --> 0:14:15.800 Better than it was in late twenty two and twenty three, 0:14:15.960 --> 0:14:17.680 where we've had quite a bit of disparity, and that 0:14:17.760 --> 0:14:19.520 was one of the reasons for not getting a lot 0:14:19.520 --> 0:14:20.200 of M and A done with. 0:14:20.360 --> 0:14:22.680 Have the buyers come down or have the seller Like, yeah, 0:14:22.760 --> 0:14:25.040 the buyers come down, the seller's gun up or vice versa. 0:14:24.960 --> 0:14:25.760 Some of both. 0:14:25.840 --> 0:14:28.560 I do think that the obviously the market has improved 0:14:28.680 --> 0:14:31.440 overall over the course of late twenty three and twenty four, 0:14:31.520 --> 0:14:34.040 so valuations have ticked up off of their lows. But 0:14:34.080 --> 0:14:36.480 I also think seller expectations have tempered a bit. We've 0:14:36.480 --> 0:14:39.400 been in this valuation, this down more down valuation environment 0:14:39.440 --> 0:14:42.280 now for almost two years, and eventually you have to 0:14:42.280 --> 0:14:43.600 realize this is the new normal. 0:14:43.800 --> 0:14:46.360 Yeah, I think that this I guess the question I 0:14:46.400 --> 0:14:49.040 was asking a lot of IPO bankers is when is 0:14:49.080 --> 0:14:52.320 that stigma of, you know, a down round. 0:14:52.480 --> 0:14:54.720 When is that going to kind of ease up off 0:14:54.760 --> 0:14:55.320 the marketplace? 0:14:55.320 --> 0:14:56.480 Because I felt like I didn't want to be one 0:14:56.480 --> 0:14:58.440 of the first people to do an IPO at a 0:14:58.480 --> 0:15:00.600 down round or would do a down run in the 0:15:00.600 --> 0:15:01.240 private market. 0:15:01.360 --> 0:15:03.840 So but it maybe more deals we get done, Maybe 0:15:03.840 --> 0:15:04.640 that that that happens. 0:15:04.760 --> 0:15:06.520 So on the M and A space here, I mean, 0:15:08.280 --> 0:15:10.360 how are you targeting your business, what your target sheheet 0:15:10.440 --> 0:15:13.200 look like, what type of company are you calling on? 0:15:13.600 --> 0:15:17.000 So we focus on late stage private companies and public companies. 0:15:17.480 --> 0:15:20.320 We will represent either buyers or sellers. That's a little 0:15:20.320 --> 0:15:23.080 different than other boutiques who tend to focus only on sellers. 0:15:23.880 --> 0:15:25.680 We think it's important to be able to do both. 0:15:26.600 --> 0:15:30.200 But opportunities in the one hundred million of enterprise value 0:15:30.200 --> 0:15:31.880 all the way up to a billion and well beyond 0:15:31.960 --> 0:15:35.160 is where we where we do our work. Might characterize 0:15:35.160 --> 0:15:37.720 that as middle market, but there's a that's where you know, 0:15:38.120 --> 0:15:39.880 under the M and A curve that's where the greatest 0:15:39.920 --> 0:15:42.080 amount of area is. So there's a lot to do there. 0:15:42.760 --> 0:15:45.840 We focus mostly on enterprise technologies. So again I mentioned 0:15:45.840 --> 0:15:48.000 the enterprise use case for AI. A lot of our 0:15:48.040 --> 0:15:51.680 companies are then are selling two big companies themselves saying here, 0:15:51.720 --> 0:15:53.600 here's how I can make you more efficient, how I 0:15:53.600 --> 0:15:56.120 can help you drive more revenue. That's where we spend 0:15:56.200 --> 0:15:57.680 most of our time. And there's a there's a lot 0:15:57.760 --> 0:15:58.960 of great software companies in there. 0:15:59.000 --> 0:16:00.480 Well, okay, I was in say Soft, where I feel 0:16:00.480 --> 0:16:03.760 like there are gazillion software companies like this one reports 0:16:03.640 --> 0:16:05.440 and some reports like it could snowflake. I have no 0:16:05.480 --> 0:16:08.160 idea the difference as like a general market person like, 0:16:08.200 --> 0:16:10.280 are we going to have to see big consolidation within that? 0:16:11.280 --> 0:16:13.280 I think we will see more consolidation. I'm not sure 0:16:13.280 --> 0:16:15.680 it's going to be big to big. I think you're 0:16:15.680 --> 0:16:19.160 going to continue to see the larger players acquire small 0:16:19.240 --> 0:16:21.480 medium sized companies on a relative basis to their own 0:16:21.480 --> 0:16:24.920 market caps. And that's, you know, certainly, that's what we're 0:16:24.960 --> 0:16:27.440 counting on. We don't think because you touched up, Paul, 0:16:27.480 --> 0:16:29.640 we don't think we're going to see a surgeon IPO activity. 0:16:29.800 --> 0:16:31.520 It'll be busier this year than it was last year, 0:16:31.520 --> 0:16:34.960 but that's a very low bar. Obviously, Ultimately ninety five 0:16:34.960 --> 0:16:38.200 plus percent of venture backed companies that get to an 0:16:38.200 --> 0:16:39.680 exit get to an exit through EM and A. 0:16:39.800 --> 0:16:41.760 And that's that's been true for literally decades. 0:16:42.120 --> 0:16:44.760 One of the things that's new, at least since I 0:16:44.800 --> 0:16:46.920 was on the street, was this whole private credit market. 0:16:47.200 --> 0:16:50.760 How does that impact your business to technology industry? Because 0:16:51.160 --> 0:16:53.720 I would guess it's just another form of capital for 0:16:53.760 --> 0:16:54.680 your companies, that's right. 0:16:54.720 --> 0:16:57.600 So it's it's been a boom for our business. We 0:16:58.000 --> 0:17:01.680 brought in a team led by Mike Meyer Partner who 0:17:01.720 --> 0:17:03.880 owns our capital markets businesses that actually is now our 0:17:03.920 --> 0:17:05.800 CEO has done a great job with that. That's almost 0:17:05.840 --> 0:17:08.600 two trillion dollar asset class from private credit today and 0:17:09.040 --> 0:17:12.840 it's also available to technology companies earlier than it ever 0:17:12.880 --> 0:17:15.439 has been before. So to your point, we can go 0:17:15.480 --> 0:17:17.920 to our clients and say, let's talk about your capital needs, 0:17:17.920 --> 0:17:20.080 the cost of capital that you're looking for, the flexibility 0:17:20.119 --> 0:17:22.680 you're looking for, and let's look across the entire debt 0:17:22.680 --> 0:17:25.679 equity spectrum and find a solution for you. And you 0:17:25.680 --> 0:17:27.560 can go to the private credit markets and find that 0:17:27.560 --> 0:17:30.520 tailored solution much easier than you can in the public markets. 0:17:31.359 --> 0:17:33.280 What other ways are we financing deals here? 0:17:34.640 --> 0:17:36.720 Again, most of the large acquirers are going to finance 0:17:36.760 --> 0:17:39.680 at largely off their balance sheet. Okay, so I mean, 0:17:39.720 --> 0:17:41.800 obviously if it becomes a really large deal, you might 0:17:41.840 --> 0:17:44.840 see the bigger companies go into the market. But to 0:17:44.880 --> 0:17:47.600 the point that Paul made earlier, right, that's a lot 0:17:47.640 --> 0:17:49.399 more expensive now, and so they prefer not to do 0:17:49.440 --> 0:17:53.040 that if they don't have to. Occasionally we're seeing stock 0:17:53.080 --> 0:17:55.560 for stock deals those used to be de Reger not 0:17:55.600 --> 0:17:59.840 so much anymore amongst the larger buyers. But mostly this 0:17:59.920 --> 0:18:02.560 is still a cash buyer's market, and so if you 0:18:02.560 --> 0:18:04.520 don't have enough cash on hand, then you're going to 0:18:04.600 --> 0:18:06.360 have to go out and find it. And I think 0:18:06.400 --> 0:18:10.280 we'll start to see a return to equity based financing, 0:18:10.320 --> 0:18:12.320 convertible based financing again, a lot of the use of 0:18:12.359 --> 0:18:15.400 the private credit market with its flexibility. Will we'll back 0:18:15.440 --> 0:18:16.040 some of the M and A. 0:18:16.080 --> 0:18:17.000 That's going to happen this year. 0:18:17.040 --> 0:18:19.359 I'm guessing in your middle market size, you don't have 0:18:19.400 --> 0:18:20.600 to deal with regulators. 0:18:20.240 --> 0:18:21.120 Too much approving deals. 0:18:21.160 --> 0:18:24.040 But boy, across the industry, if I'm a big ticket 0:18:24.119 --> 0:18:26.359 M and a banker, I got to make sure I 0:18:26.400 --> 0:18:28.520 got the right lawyers give me the advice because I 0:18:28.520 --> 0:18:32.440 didn'tink the Department of Justice, the FTC, everybody's cracking down. 0:18:32.760 --> 0:18:35.439 It's true, and we think of it in terms of 0:18:35.880 --> 0:18:37.879 to whom are we going to be selling this company, 0:18:37.880 --> 0:18:39.440 because if you're one of the Big seven, you're gonna 0:18:39.440 --> 0:18:42.520 get scrutiny for almost every deal, right, and so we 0:18:42.560 --> 0:18:46.080 watch for that as as we bring opportunities forward and 0:18:46.119 --> 0:18:47.480 think about what that might look like. 0:18:47.520 --> 0:18:49.840 But you're right, it's really that group. 0:18:50.280 --> 0:18:52.000 And let's face it, they have lived for a very 0:18:52.040 --> 0:18:55.240 long time on asking for forgiveness, not permission, and I 0:18:55.240 --> 0:18:58.080 think they're going to continue that activity. But by the way, 0:18:58.119 --> 0:19:00.760 it's not just the DJ here. We've seen a lot 0:19:00.760 --> 0:19:02.600 more activity and scrutiny out of Europe and the UK 0:19:02.720 --> 0:19:04.760 in particular, and we think that's going to continue for 0:19:04.760 --> 0:19:05.040 a while. 0:19:05.080 --> 0:19:07.600 Yeah, the UK, they get Brexit and then they realize, oh, 0:19:07.760 --> 0:19:09.000 we can have a seat at the table now. 0:19:09.080 --> 0:19:10.400