Taubman Warns of Economic Shock From Profound AI Pivot

Bloomberg

Watch Taubman Warns of Economic Shock From Profound AI Pivot - Bloomberg on Dailymotion

Transcript

00:00The last time we spoke was a year ago when you had just announced the tie-up with DeNovo.

00:05You just acquired DeNovo. How is that tie-up going?

00:09I think it's everything we had expected and more. We're a global firm. We needed a presence here

00:15in the Gulf. We made a commitment that we would wait until we found the right team,

00:20the right franchise to connect to our global network. We'd had the opportunity to know the

00:26DeNovo folks for years, worked together at Morgan Stanley. We had a strategic partnership

00:32which had gone swimmingly well. We made a commitment to combine the enterprises and the amount of

00:38traffic back and forth between Saudi and Europe and the U.S. and the idea flow and the connectivity,

00:46it's been extraordinary. So we're delighted. Has it been a busy year?

00:49It's been a very busy year, but we're spending a lot of time really introducing the franchise that

00:55is very well known outside of the region, into the region, and doing it in a way that

01:00highlights why we're different. So we're spending a lot of time bringing our industry experts,

01:06connectivity, bringing ideas, connecting capital. So it's been a great journey.

01:11Yeah. How would you say you distinguish versus the competitors? Because I'm also speaking to many

01:15of your competitors who are, again, looking to get involved in the deal-making in the region,

01:20and there's certainly a lot of it. What do you think gives you the edge?

01:23Well, first of all, we started our business from the ground up. We created this firm post-financial

01:28crisis. We did it in a way where everyone wanted to be part of a global enterprise,

01:33but do it in a more entrepreneurial way. So what that means is everyone works together.

01:39Everyone is client first. No one is thinking about what's in it for me. It's all client-centric.

01:45And if you're going to cover the region, you need to bring your best bankers,

01:49and you need everyone to be client-facing. You need them to put the client first. And that all

01:54starts with culture. So that's really what differentiates our firm.

01:57What is your outlook for deal-making in the region before we speak more globally?

02:00Well, I think it's certainly up and to the right. There's so much capital. There's so much ambition.

02:07There's so much interest in investing. So you've got dollars and capital flowing into the region.

02:13You have desires to diversify and to create opportunities for know-how and knowledge outside.

02:21So it's a virtuous circle, and we think we're just getting started here.

02:25Yeah. Okay. Since I mentioned deal-making, there actually has been a pickup in global deal-making

02:30in the last couple of months. Do you think that's with us to stay? Is that going to continue into 2026?

02:35I certainly believe that it should. We had been forecasting that this would be

02:39the second-best year in a decade. I think that's proven out. No matter how much more activity we're

02:45seeing this year, it still pales when you step back and look at it in a historical context.

02:51So even though the volumes are tracking up 30% plus or minus this year, volumes as a percentage of

02:58global GDP or global market capitalization are very far from historic highs. So we think there's

03:04a lot more to run. The regulatory environment is more conducive to consolidation and combination.

03:11I think private equity firms who've struggled to return capital are now getting that flywheel

03:15moving. So they're starting to be more active. So all of the conditions are present, not to mention

03:23the fact that we're sitting here at record high equity values and deep access to debt capital.

03:28And yet there's a shutdown right now in the U.S. Is that putting the brakes on a little bit in

03:32terms of, you know, obviously IPO activity into the last few months of the year?

03:36There's really, it's unfortunate to say, but I'm not sure that for most people there's really an

03:42appreciation that the government is shut down. So we're moving along. Deals are getting announced

03:47and capital is being raised.

03:49Yeah. And you see that with how stock markets are trading. And you just mentioned, you know,

03:53the bull run right now in stock markets. I look at, you know, where Wall Street indices are

03:59trading and look at where credit spreads are trading. This has been a almost 16 year bull

04:02run, you know, for these markets. Do you worry that things are looking topish?

04:09Well, it's a 16 year bull run with some intervening events. So the financial crisis,

04:15COVID and the like. And I'm always asking myself, where are we in the cycle? Because the best deals

04:21are early to mid cycle, you don't want to be late cycle. I think the AI pivot is so profound.

04:30On the one hand, there's so much capital that's flowing into data centers, into energy, into

04:38technology. On the other hand, it's going to be so dislocating to the overall economy that you have

04:45to ask yourself at some point in time, are the second and third order consequences a shock to the

04:50system. So you're always, you're always looking around the corner trying to figure out what's

04:55next. But that's why I think there's a bit of unease, because on the one hand, everyone knows

05:00that the direction of travel is to more technology, more automation, more sophistication, more

05:06streamlining, but there are going to be job dislocations, like you see it with Amazon's

05:11announcement overnight. So if the consumer starts to slow down because they see others losing their

05:19jobs and start to worry, what does it mean for them? That could make things a bit more fragile.

05:25How do you read first brands and tricolor situation from a couple of weeks ago? Are you worried that

05:31there are more types of these situations that are going to pop up?

05:34Well, as you know, we have the world's leading restructuring and liability management franchise.

05:38There's nothing I'd like more than to sit here, pound my chest and tell you that the sky is falling

05:43from that perspective. But the reality is, we don't really see that. There are all sorts of

05:50allegations, which need to be determined. And there are idiosyncratic risks with companies all

05:56the time. And there are companies that go under, whether it's for fraud or other reasons. So we're

06:02not directly involved in that situation. What we are seeing is a lot of transactions that were birthed in

06:092021, right after COVID, where there was free money and a risk on mentality. A lot of those

06:17transactions have come undone. The equity returns aren't there. The debt returns aren't there. We're

06:23spending a disproportionate amount of our time restructuring that vintage of transactions.

06:27Yeah, interesting. You know, to your point about where we are in the cycle, typically, you'll see a pickup

06:33in frauds, you know, towards the end of the financial cycle. And I just wonder whether, you know,

06:38from that perspective, you're thinking, okay, there are a couple of incidents here of frauds.

06:42Maybe this is an indication that, you know, we're coming to the end of this.

06:47I'd like to see more than one or two data points to make that. I think human nature being what it is,

06:52you're always going to see, you know, untoward actions from time to time. If there's more sense

06:59that it's pervasive, yes, but we don't see that at the moment.

07:02Okay, so bullish for next year.

07:04Certainly bullish for next year.

07:05Yeah. Okay. I want to ask you about the investment bank because the bank has been

07:09growing very, very fast. You know, what is your outlook for the bank? What are your ambitions?

07:14What are your plans for the bank from here?

07:16Our ambitions are simple. They're quite profound, but we want to be the world's best investment bank.

07:22And we have extraordinary ambition, but we also have near infinite patience. And we know that if

07:27we're going to build the world's best investment bank, you can't do it overnight. We've been at this

07:31for 10 years. I think the success that we've had in 10 years is extraordinary. But if you're

07:36building it out from scratch and you need to be in every region around the world, every industry

07:41vertical, every capability, it takes time and you need to be consistent and you need to have something

07:47that unites everyone. And that's the culture. And that's the desire to serve clients. And that's

07:52the desire to be the world's best. And I think we're early days, but what we've accomplished in 10

07:58years is something we're quite proud of. But the next 10 years begins today.

08:03Yeah, no, absolutely. And let me just run up, because we've spoken about the U.S. and we've

08:07spoken about the Middle East. You know, where does Europe fit into all of this?

08:11Look, Europe is certainly struggling. It doesn't have many of the advantages that the U.S. has.

08:17I do think, though, that valuations have gotten so dislocated in Europe that there are real

08:21opportunities. And I think European companies understand that they have too fragmented an

08:28economic backdrop. And there needs to be more consolidation, more European champions. So

08:33we expect to see a pickup in deal activity in Europe as well.

Category

Transcript

Be the first to comment

Recommended