00:00Tony, let me kick it off with you because, yes, AI, a lot of investments, deals getting done,
00:04but then there are the nerves in software. Just how uneven is this year shaping up to be in tech
00:09M&A? I'd say it's quite uneven. I mean, if you look at M&A last year in tech, there
00:14were 25
00:15deals over $5 billion. So for tech, that's a good start. But for most sectors, that's an amazing
00:21number of deals. And then you've got this big kickoff here with the AI deals this year. But
00:26there's this real dichotomy. They're actually the same thing. You've got everyone investing in
00:31growth in AI, and you've got everybody worried about what AI is going to do to the rest of
00:34technology. Yeah. I mean, Rich, it's a good point. You can't have all this fervor and excitement about
00:39AI deals and then at the same time be really excited about software, too. That's true. I mean,
00:45software's faced a lot of inflection right now, a lot of questions and uncertainty. But there's still
00:51some really good software companies out there. And in order to get a deal done, there has to be
00:55some level of certainty and value expectation from both sides. We're seeing it that hard to do
01:00right now because of all the uncertainty. But if a savvy strategic or sponsor is willing to make a bet
01:06right now, I think they could find a really good company that will survive all the uncertainty of
01:11AI. How much of this do you think is being driven by? We had it in the sound at the
01:15top there behind
01:16this idea of the art of the possible. We'll hear about this a lot in M&A in terms of
01:19a business-friendly
01:20administration like we have now. How much of this acquihire slash licensing type transactions that
01:25we've seen are being driven by this idea that we don't want to be caught up in 18 to 24
01:29month fights with
01:30regulators? So Rich and I both worked on the scale AI deal with Meta. I would say, actually, although that
01:37is
01:37one aspect of it, I think these deals are being driven by what I'll call AI time, right? Like it's
01:44changing every month. You don't know where it's going to be in three months. How could you possibly
01:48sign up for a deal that could take 18 months to close? It doesn't work for a buyer. It doesn't
01:52work for a seller. That's why you're seeing this pivot to all of these, you know, partnership type
01:57transactions. And that really has become more the norm in the AI deals. And there's intense
02:03competition right now for AI talent. Very, very intense. Everyone wants to hire the best team so
02:08that they can be competitive in the market. And in order to do that and get people working together
02:15quickly, business people are saying, what's the right way to do this? The fast food advice would
02:20be to just go do M&A. But that's, you know, not everyone wants to eat a combo meal. So
02:25do you think
02:25that there's a view now that, you know, as we get sort of into the midterms later this year, and
02:29then,
02:29you know, you kind of think that there may or may not be a shot clock that's running. Are there
02:33people that in boardrooms are thinking like, OK, now is our time. We have this many months left
02:36to get a deal done. Is that how people are thinking or perhaps not? I think that's definitely
02:41the case broadly across M&A. You've seen larger deals than you've seen in a long time. And there
02:47are a number of sectors where people are taking that approach. I would say less so in technology.
02:53I mean, remember, technology is the industry that's been under antitrust monopoly investigation
02:57for a lot of years. So I don't know that that's going to be the catalyst for them.
03:00Because, Rich, I mean, a lot has been said about, like, the circular financing of all of this,
03:04of how interrelated all these companies are. So, like, are the regulators just completely
03:09turning a blind eye? Is there any risk there at all?
03:13The law, the interest laws are set up to regulate particular types of transactions. And these types
03:19of investments are not the things that traditionally get picked up by antitrust laws. The regulators are
03:24looking at these transactions. I think every big acquihire type transaction that you're referring to
03:29has been looked at by the government at some point. But there's, at this point, the way the laws are
03:33set up, there's just no real way for them to come in and enforce it if the deal is structured
03:37and
03:38the way to it all achieve all to achieve business objectives at the end of the day, not necessarily
03:42to avoid a regular regulatory scrutiny. I mean, presumably that we're talking about American law.
03:47I mean, what about the risk internationally, Tony? It's something that the Europeans constantly look
03:51at. Yeah, I mean, absolutely. The, you know, these, actually, we don't call them Aqua anything
03:57because they're not M&A deals, but they are. They do kind of feel that way. We call them lift
04:02transactions. I don't need to get into it. But, you know, the various jurisdictions around the world
04:07have come out and said, hey, this looks like an M&A deal. I'm going to look at it more
04:11closely. The U.S.
04:12has done that most recently with the Grok deal. So it is something folks are taking a very close look
04:17at.
04:17However, you know, actually, like if you look at the components of these deals, they are not
04:22actually antitrust reportable. It's just sort of like the looks like a duck, quacks like a duck
04:27kind of, you know, element. Going back and taking a step back and thinking about some of the pain
04:31that we've seen so far this year in software. I mean, it strikes me that we haven't really seen a
04:35quote unquote traditional software M&A deal print so far this year. I mean, as you think about it,
04:41what might, you know, software have entailed as far as M&A is concerned once the three mega IPOs perhaps
04:46are
04:46out of the way this year? Will there be a re-rating in the sector? What's your take on that?
04:51Sure. Yeah. So look, I think that the what's obviously dynamic time in software and troubled
04:57time for M&A. And the way I like to say it is, you know, the sine wave of what's
05:03going on in the
05:03market is definitely, you know, too volatile. But there's a through line there that is probably
05:08accurate in some way. And everyone just sort of that thought, you know, maybe it's 10 years.
05:13And then is it five years? I'm like, oh, my gosh, is it today? Right. And so people can't,
05:16when people can't underwrite that long term, it's really hard to see buyers and sellers coming
05:20together. So there's got to be some stability. We're seeing a little bit of that. I mean,
05:24you know, I think it's actually, the world seems to be thinking it's accruing to the benefit of the
05:28AI companies. But eventually here, we're going to get that through line and then people will start
05:32to transact. Yeah. And software companies are making huge investments into AI as well. So over time
05:38throughout the course of the year, next year, I think you'll see a lot of good software
05:41companies that have developed their own internal AI products that, you know, they already have
05:46customer confidence. They have a goldmine of data and the expertise in critical areas like
05:53accounting and tax and security. These areas that I think require such a high degree of accuracy and
05:59certainty that once the software companies develop their own competitive AI product, probably going
06:05to get a lot of traction. And as you guys think about going into boardrooms and talking to CEOs and
06:10management teams around, you know, who their likely buyers would be, how do you guys think about, you
06:15know, private equity in general? Are they leaning in? Are they leaning out of tech? Because we've seen so
06:19many headlines, particularly on private credit, people may be pulling back a touch. Private equity is
06:24looking at a lot of companies, and they're having some of the squeamishness that Tony was referring
06:29to, looking to see what the long term vision is going to be. Is the terminal value really going to
06:34be zero, like people might be afraid of? Or is it going to be something different? And I think
06:40they'll keep doing their homework and probably we'll see some deals in the later half of the year would be
06:44my guess. Yeah, I mean, look, there's probably no group, you know, in the whole ecosystem that has more
06:49of vested interest in figuring this out. And so they're hard at work, and I wouldn't count them out.
06:54And we started this with Scarlett just pointing out that the deals that we have been have been very
06:58large in size. So I think it's fair to say that volume has already started off to a really large
07:02degree. I would love to just wrap it up with your crystal ball, your expectations for the rest of
07:062026, not just the big deals, the big IPOs, but what this year actually shapes up to look like in
07:12sort of the
07:12amount of deals that get done. Sorry, not the value, but the volume of deals that goes down. Tony, if
07:16you want to
07:16kick us off. Sure. Look, there's there's overall in M&A, there's the whole what's going on in the
07:22Middle East, and there has been some, you know, some static there. There's been this trend towards, you
07:27know, larger deals, sort of, you know, regulatory aspects to them. In tech, I think that there's a lot of
07:35stars aligning around what is your AI strategy, right? Some of that's internally developed, as Rich is
07:41saying, some of it's going to be acquisitions. There's this gap, this gulf between, you know, buyer and
07:46seller expectations. That's on the, you know, more traditional software side and on the AI side. But I think
07:51you're seeing some softening on both of those elements. So I do think that there's going to be quite a
07:55lot of
07:55stuff. I do also really, really believe that these nontraditional structures are going to be prominent in
08:01AI. But you see the same thing, the gap starting to close? Yeah, I mean, completely. The volume in tech
08:06M&A is
08:07always very high. And it's not necessarily the types of deals that you all would report on here at Bloomberg.
08:12But the
08:12backbone of technology M&A going back to the 90s has been the acquisition of VC backed companies,
08:18private companies. And it might be a $500 million deal. It might be a $250 million deal. But
08:24companies are going to be looking at those types of acquisitions. And the volume is very,
08:28very high. I think I'm working on probably a 10 of those right now.
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