00:00It feels a little bit like deja vu I have to say. Last year we entered the year saying this
00:04is going to be the year of M&A and then April 2nd happens.
00:07This year we enter 2026 again saying this is going to be the year of M&A and then there's
00:11this big AI disruption.
00:13Can this year be saved? Is 2026 going to be the year of M&A returned?
00:18Well the great thing about M&A practitioners is it's always a good time for M&A so they always
00:23predict it's going to be great.
00:24But there's actually a couple of things that are holding it back. One is that market valuations are actually pretty
00:30high.
00:31If you look at the market and what it's trading at, you know, forward earnings, it's very, very high by
00:38historical standards.
00:39So it's hard to do deals other than all stock deals. And there's also some volatility in the market.
00:45So certainly in the sectors you talked about, which is AI, software and the like, very hard to do deals
00:51when there's a lot of volatility.
00:53So I'm not surprised that the deal markets down.
00:57Does it does it seem jumpy enough, though, that this is kind of the rest of 2026?
01:02Because I don't know how we solve the AI problem. We're not going to know where that goes for some
01:05time.
01:06So do we just have to contend with this is the kind of world we're living in for M&A
01:10right now?
01:11I actually do think it's going to be somewhat muted this year.
01:14I don't see any particular I don't think any kind of trigger that's going to cause it to pick up.
01:20You know, people need to do M&A. I mean, companies need to do it.
01:25It's very hard to get organic growth. So there is a need for it.
01:29But with valuation so high, I just think it's difficult to do.
01:33So you've advised many companies through moments of crisis.
01:37You were the top of M&A at Morgan Stanley during the financial crisis.
01:43Jamie Dimon recently said that he sees echoes of that period starting to form now.
01:47Given your experience, then, are you seeing the same thing?
01:51Well, Jamie is a very smart guy. So I actually take his point.
01:56I do think there's some similarities in that the entire I'm not smart enough to know if crypto is good
02:04or bad or valuable or not.
02:05But when you go through these cycles, you do have pools of assets that people are concerned about.
02:12And whether they prove right or wrong, who knows?
02:15But one of them is crypto. Another one is credit funds.
02:18They may all be fine, but there, in fact, may be a trigger.
02:21And what is at least concerning to me is the high valuations in the market.
02:28But if we do have something triggering that, it could be a difficult time.
02:33What would that difficult time look like?
02:34Well, I wouldn't be surprised to see a drop in the market of, you know, 10 to 20 percent of
02:40the market,
02:41which, again, given how it's gone up so much in the last couple of years, would not be all that
02:45difficult.
02:46I think from an M&A perspective, that might actually be good.
02:49It might be bringing more people into the market.
02:50I was going to say, because in moments of disruption, there are always these big opportunistic moments.
02:55I mean, financial crisis, Bank of America, Merrill Lynch, there's a long litany of lists.
02:59Do you think that if we get to that moment, what might be the thing we look back at and
03:03say that was the big opportunity?
03:04What could be the big opportunity this time in a market shakeout?
03:07Well, we don't really know, you know, which industries are going to cause it or industries that are going to
03:14emerge from it.
03:14But so I really don't know.
03:17I must say, having been in this business a very long time, you know, I was in London.
03:22I know you spent some time in London.
03:23I was in London on Black Monday.
03:25I mean, I've lived through a lot of these cycles.
03:27I've lived through the dot-com bubble.
03:30And, you know, the last deal I did when I was a lawyer last time was AOL Time Warner.
03:35And look how that worked out.
03:36I was just a lawyer.
03:37I wasn't a banker on the deal.
03:39Important caveat.
03:39Thank you, Rob.
03:40OK, so when you're advising companies now and CEOs, are you advising them in that sort of, this is a
03:46hyperbole, but that kind of wartime positioning?
03:49Are you talking to them and readying them for saying, hey, there might be some sort of shakeout to come?
03:54Yeah, I think boards generally are focused on a couple of things.
03:58One is having a very strong balance sheet.
04:01And people who have debt maturities coming up are trying to extend it because rates are still relatively low.
04:07And that's the best preparation you can have.
04:10You know, we went through eras and times, including before the financial crisis, where people were actually levering up to
04:17buy back stock.
04:18Didn't really make any sense to me.
04:20So I think CEOs now are very focused on balance sheet, very focused on being able to weather any storm
04:26that comes.
04:26We're also very focused on cost-cutting, which you're seeing from large companies like, you know, Amazon to smaller companies.
04:34Cost-cutting is important to at least be ready.
04:36We're also seeing some deals.
04:37I wonder if we ever would have dreamed of, in prior times, our reporter Ryan Goldscoop, that Stripe is looking
04:44at PayPal to direct competitors.
04:46Are you now hearing from companies that are thinking of things that, again, they wouldn't have last – they wouldn't
04:51have two years ago just because a regulatory environment has changed?
04:55I actually don't buy that.
04:57I do think we have a – we do have something of a different regulatory environment.
05:02The last administration, you really couldn't get anything done.
05:05And they were looking at theories of antitrust that had been abandoned 20, 30 years ago.
05:12So this new administration is much more willing to look at things, be creative, you know, do kind of behavioral,
05:20you know, remedies.
05:22On the other hand, it's a pretty populist administration.
05:26It's not exactly a pro-tech, pro-pharma administration.
05:29So I don't think that the regulatory regime is going to result in a lot more deals.
05:34There's exceptions to it.
05:36I mean, exceptions are, you know, transactions that you would have never thought could have happened under a prior administration
05:43happened under Trump's last administration.
05:45Like when they allowed the T-Mobile deal and Sprint to happen.
05:49That wouldn't happen.
05:50So, yeah, I think it's around the edges.
05:52And also, the European regulatory regime really hasn't changed.
05:56But just before I let you go, because there has been a leadership shakeup at Paul Weiss, Scott Barche, who
06:01himself, like you, is a deals man, an M&A person.
06:04Does that change the direction at all of Paul Weiss?
06:07How are you thinking about the trajectory of the overall firm?
06:10Well, you know, Scott, you may or may not know this, but, you know, Scott spent the first 10 years
06:15of his career working for me.
06:17And so I know Scott really, really well.
06:19In fact, Scott was the guy who brought me over from being a banker to being a lawyer again.
06:24And Scott is clearly, he is clearly the best M&A lawyer of his generation, probably because he got good
06:32training from me.
06:33You put him over you?
06:33Right.
06:34Well, of his generation.
06:35Got it.
06:36Okay, understood.
06:37But I think it's important to focus on Scott is that he's been the architect of what Paul Weiss has
06:43done in the last several years.
06:45Like if you think about London, which is the market you know well, he brought over Roger Johnson, Neil Satchdev
06:50two and a half years ago.
06:52That London office is exploding, right?
06:55He brought over Eric Waddell in L.A. and just in the last week, Debbie Yee and Sean Wheeler in
07:02Houston.
07:02So Scott, who is a great M&A lawyer, actually has been the guy who's been driving the firm.
07:08So, no, I'm very optimistic.
07:10I think it's all for the good.
07:12I think it's all for the good.
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