00:00Incredibly important that we have a constructive pricing backdrop. We've had an incredibly
00:06robust issuance backdrop this year, but with very binary outcomes. Deals that are up 30%,
00:11countered with deals that are down 30%. And so I think to keep this window open through the spring
00:16and summer pricing season, some constructive outcomes are sort of must-have. That binary
00:21outcome, is it just because some are really smart deals in price 12, some weren't price 12? Is there
00:26anything that you can say as to why you've seen those two different pathways? So many of the
00:29outcomes are deal specific. I think what has been instructive and what will be interesting to watch
00:35in this next cohort of deals is obviously aftermarket support for each of these transactions.
00:41We have a number of transactions that are for, as you mentioned, sort of multi-billion dollar assets
00:46that are coming to market, a lot of them private equity backed. There will be more to come in terms
00:50of supply on a lot of these transactions. And I think what's been very encouraging on top of the
00:55resilience of the market, given the volatility that we're seeing, is the resilience of risk appetite
01:00from the buy side, which again, as we look for green shoots to keep this window open longer,
01:06those are all sort of very positive barometers for us as equity capital markets professionals.
01:11Well, take us behind the scenes. We're living in a market that moves on every headline and every
01:15potential attack or conversations around a ceasefire. With DC and Iran at the front of everyone's mind,
01:23going into earnings season, what are the conversations like among your banking peers
01:27when you're talking to a management team about, okay, now is the time for us to look to make a
01:31deal?
01:32Yeah, look, sometimes you don't know that the IPO window is open until you look down and it's
01:37definitively closed. And so for the folks who have done diligent preparation, they've tested the
01:43waters, they've engaged with institutional investors as part of their IPO prep, these valuations are
01:47generally quite well underwritten by the buy side prior to launch. You see a number of transactions
01:53that are coming to market this week that have cornerstone institutional investors or sponsors
01:57who are already sopping up some of that liquidity that will come to market.
02:01Making sure it goes well.
02:02Exactly. And so these deals are structured to be successful at the outset.
02:06Go.
02:07Well, no, I was just going to ask.
02:08This is your world.
02:09But we've been talking, right? So industrials, aerospace and defense, healthcare,
02:14are they active because of the calendar? Are they active because investors are saying to you
02:20and your colleagues and your peers across the street, hey, we want more of these types of
02:24companies?
02:24Yeah, not to get asset specific, but certainly some of the subsectors that you talked about
02:28are very much of the moment. Defense tech, space tech, other parts of the market that are obviously
02:33becoming very quickly sort of part of the zeitgeist, which you guys are covering quite well.
02:39Well done. Those are obviously very of the moment. Outside of that, again, you mentioned industrials,
02:45multibillion-dollar EBITDA companies that have been around for decades. I think these are assets
02:49where institutional investors feel very, very comfortable. Again, there's a lot of capital
02:54rotation that's going on. The set-it-and-forget-it software market of the last 10 years, a lot of
02:59that
02:59capital has been freed up and is looking to be redeployed into these new stories, new IPO entrants
03:04that are coming to market.
03:05When you talk about Michael, we're talking with Michael Ventura over at RBC Capital. And is it companies
03:11that have been private, private equity-owned for a long time? So they've got a nice duration in terms
03:16of the business. You can look at a bunch of the balance sheets over a period of time. That's what
03:21you're talking about. They're finally coming to market.
03:23Exactly. Durability through cycles. These are investments that our private equity clients have
03:26made, have held them probably a little bit longer than the normal private equity cycle, scaled them
03:31a little more significantly than normal, and are looking out at a market backdrop where valuations
03:35are frankly exceeding expectations. So it's a perfect time, volatility aside, to be entering
03:41the market again.
03:42Well, you mentioned you don't really know an IPO window is open until it's closed. I feel
03:46like talking to some of your peers over the last few weeks, the sense was almost, if you
03:51talked to issuers who were on file, we wish we went a few weeks ago. Is that kind of your
03:55read of where we're at?
03:57Timing this market, we've talked about this before, timing this market is as much a function
04:00of luck as anything else. Luck favors the prepared. And so again, it's that underwriting of valuation
04:05that you're doing in the private market in your final stages of IPO prep that I think will
04:09really separate winners and losers in this next open window.
04:13So something like SpaceX, I mean, is it just a whole other category you throw that into
04:17and that's the anomaly?
04:19A whole other category. Obviously can't comment on any specific transactions that may or may
04:23not be preparing for market. But I think thematically, you will see a number of very
04:29significant sort of seminal capital markets events potentially over the next number of months.
04:34And those will sit in a category by themselves.
04:36When you mentioned defense though, and you like opportunistic, I mean, does that mean
04:40that it's not a good company going forward? You know, that if they're looking at the market
04:44saying with the war on and so on and so forth, the defense spending that's going on, not only
04:48in the US, but also overseas, it's a good time. Does that mean they're just being opportunistic
04:53and it's not necessarily a longer term good play or no?
04:57No, I think, look, I don't think you can ever fault a private company for sort of timing
05:02the market when the subsector in which they operate is as front and center in the day-to-day
05:08news flow as some of these assets that are coming to market right now are. I certainly
05:12don't think that's a barometer or a telltale sign of future market performance.
05:16Because you know when things are hot and you take advantage of a certain situation, you
05:19get sometimes some things that shouldn't be public.
05:22Well, we see that play out with some of the themes, I think, back even to last summer with
05:27some of the crypto deals that we saw getting done. Totally. And obviously the aftermarket
05:30performance has been pretty lackluster. But Michael, I just want to come back to kind
05:33of the point you made about aftermarket performance. Half of the 10 largest deals this year, a lot
05:39of numbers, down more than 25%. When we look at a horizon that has two notable deals this
05:45week in Madison Air and R6, I know you can't talk specifics, but how important is it that
05:50the deals that get executed in price this week and next week that kicked off earlier
05:54today, that they perform well ahead of what is going to be presumably a pretty busy stretch?
06:00It's table stakes. That is what will set the stage for the health of this next open window.
06:06Now keep in mind what's going on in the background. We're moving from a macro-driven environment,
06:11as you guys have been talking about over the last few segments, a micro-driven environment
06:15with respect to earnings. And so I do think that's actually going to be quite a grounding
06:20mechanism for institutional investors to get back to company-specific earnings reports and
06:26more of a micro focus of the market versus this macro environment that we've been living in.
06:30And obviously, I enjoy talking about IPOs. It's the most exciting part about my job. But
06:34certainly keeping an eye on the selldowns from some of the companies that have recently gone public,
06:39as we get through earnings blackouts, are we expecting to see a big rush with the floodgates opening?
06:44Yeah. Again, market resilience has been, I thought we retired the word unprecedented in 2021.
06:50Not at all. I would not be surprised to see our private equity clients access capital. They are
06:57by definition not hedge funds. They're not built to hold publicly traded positions. And so expect with
07:03this window opening, we'll see a flood of follow-on activity as well.
07:06And just getting back to the IPOs, we only have about 30 seconds.
07:09Tech. Seems challenged. Do we see tech companies come public? Do we see software companies
07:14dipping their toe in the water from an IPO perspective, just given all of the headwinds
07:18that are going on? I don't know that the window opens up for software, again, in the near term,
07:23though my crystal ball is in the shop. I do think a lot of that capital, though,
07:27will be happily deployed into some of the high-quality assets that are coming to market from other
07:31sectors, some of which have tech as an adjacency to what they do day to day.
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