00:00Pleased to say that I'm here with Anu Iyengar of J.P. Morgan.
00:03Anu, thank you so much for sitting down early morning here at the Beverly Hills Hilton.
00:07Yeah, best time to be on.
00:08It is the best time. And it's during our show, which I love.
00:11Listen, this has been a wild ride for you.
00:14You must be one of the busiest women on Wall Street.
00:162025 is a huge year.
00:17It gets off to a rocking start.
00:19M&A, deal activity in Q1, one of the busiest first quarters by many accounts.
00:24Given all the disruptions we face, is there any element of you that has been surprised
00:28how elevated deal activity has been?
00:30Look, I think now I've gotten over the surprise.
00:33It's a bit more because it's now been several quarters of it, right?
00:37As you mentioned, last year was the year of the mega deal.
00:41And who would have thought that?
00:42Because we had several weeks of a complete standstill right after the tariffs were announced
00:49because people were like, I don't know how to model this company.
00:52And then we went from there to say, you know what, look at the risks around us,
00:56whether that's supply chain risk, technology risk, AI risk, having people because, you
01:02know, demographic change that is happening in the world, and the tremendous amount of
01:08scale premium that the market is giving.
01:10This is astounding.
01:11If you look at 2019 to 2025, the size of a company to be in the S&P 500 or
01:18S&P 600 has tripled.
01:21And the scale premium, a larger company, smaller company, same industry, trades at a higher
01:28multiple, sometimes four turns higher multiple than the smaller company.
01:33So everybody is like, you know, let's go big.
01:36Let's go big, right?
01:37So let's do 10 plus billion deals, which is what we call mega deals.
01:41And last year we had 71 of them.
01:44This year, just in the first four months, we've had 30.
01:47And it is wild.
01:48And we're expecting these mega IPOs to come to market.
01:51I just wonder when you're looking at the pricing of these deals, if they are accounting for
01:55the huge tail risks that we're experiencing right now when it comes to AI threats, or maybe
02:01the dream of AI doesn't get realized.
02:04Are valuations in check with reality?
02:07So look, I think there's valuations in multiple different contexts, right?
02:11There's valuation of where is a company trading in the public markets.
02:16And despite the fact that you see record levels for the indices, right, if you go through
02:22that, there is still about 20% or so of various indices, the US S&P 500, or any one
02:29of them
02:30that you look at, where they are trading at a deep discount to their 52-week high or their
02:36fundamental intrinsic value.
02:38So it's not that, you know, the rising tide lifts all boats.
02:42It depends on which sector you are, which industry you are, what your size is.
02:46Then there's the private market valuation.
02:48Because again, you've seen a trend over the last, you know, couple of decades, number of
02:53public companies declining in the United States, number of private companies increasing, whether
02:59that's founder-based companies, family-owned businesses, or private equity-owned businesses,
03:05and now you no longer have the need that I have to be public in order to have access to
03:12capital.
03:13So the private market valuations have actually been pretty good and sometimes lend themselves
03:18to better diligence and understanding to say, how should I value this company?
03:24And then there's the M&A valuation, where the acquirer is saying, what can I do with this?
03:30So it may seem like somebody is, you know, buying something, I would have thought they
03:34would have bought it for a billion and they paid 1.5, but if it is worth 3 billion to
03:40me,
03:40because I'm going to buy that technology and deploy it across my full platform, so what
03:45is it worth to me?
03:47So the technology aspect kind of changes just the worth to it.
03:50So I have to ask for your business itself, you and your team were part of the reason that
03:54JP Morgan had such great earnings.
03:55I think your revenue increased something for like 38% year over year.
04:00How is this quarter looking so far?
04:01Do you think you could repeat those stellar numbers?
04:04That's always the question on Wall Street, like, what did you do for me lately?
04:09One quarter is never good enough on it.
04:11So look, April has been, I'd say, just a little bit more challenging because there's been a little
04:17bit of ceasefire, no.
04:19So just a little bit of geopolitical uncertainty.
04:21Not that we didn't have it in the first quarter, right?
04:24We're still in the middle of several geopolitical conflict.
04:28But when you see that it's about to get solved, you may say, you know what, let me just wait
04:32for a few weeks.
04:34So there's been a bit of stop and start that has happened in April, which, again, larger
04:40companies, larger deals are able to navigate better, is what we always tell boards and CEOs
04:48is don't think about what does this mean for, you know, today's stock price the day after
04:53you announce it.
04:54Think about it as what is this going to do for your company for the next 5, 10, 20 years
04:59going forward.
05:00And if the deal makes sense, you do that, despite the market volatility.
05:04And that has been a little bit of the approach.
05:06But if you think that in a week, things are going to be materially different, you can understand
05:11the psyche of the start and start.
05:13Right.
05:13So there's so there's basically being can kicking at the moment for the smaller companies,
05:18a little bit, a little bit of that.
05:19And at the smaller end of the market, sub 2 billion.
05:22Right.
05:23The number of deals has actually declined quite a bit.
05:28Because, again, when people are thinking, is this needle moving as the size of the companies
05:32becomes bigger for it to be needle moving?
05:34I've got to buy something bigger, too.
05:36And, you know, you know this, the amount of work that goes into doing any deal is just
05:41as hard whether I buy something for 500 million or 10 billion.
05:45Right.
05:46So sometimes people say, let's make it count.
05:48Let's do something that's needle moving.
05:50And the other has been for these smaller companies.
05:54It's also the impact of any one of these changes is pretty big.
05:58Right.
05:58The very reason why people are seeking skill, because when you're larger, you have more levers
06:04to pull, you know, more places from where to move things from here to there, and more
06:09flexibility in navigating risk.
06:12Right.
06:12The smaller companies find that harder.
06:14Right.
06:14And so that level, there is a lot of pent-up demand.
06:19Right.
06:19Just like, you know, all these private equity companies, which also own businesses, which
06:23also need liquidity.
06:25Yeah.
06:25And so the other place where we've seen a lot of activities in the secondary market, right,
06:30now you have GP-led secondaries and, you know, continuation funds and private IPOs and evergreen
06:36funds.
06:37So that's been another pocket.
06:38Right.
06:39This desire for liquidity.
06:40Well, I see they've sent in the dogs, Anu.
06:42So I think we're going to have to end it there.
06:44Who let the dogs out?
06:46Someone, Milken did, apparently.
06:47I don't know what you're going to do with hunger too, including my
06:47I don't know what you're going to lose it lightly.
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