Investment Banking Explained: The Art of The Spin-Off

Hello and welcome back to The Deal Room. And the theme of this episode is all things spin-offs. So if you never really understood what spin-offs are, we're gonna look to explain and why a company might want to sell a division. And as ever, a couple of real-life examples to go through in order to unpack the topic. So Stephen, how are you?

Yeah, pretty good. Thank you. And it's really nice. We're actually in the same room. This is quite, quite remarkable. Usually we are hundreds of miles apart, but today we're in the same room. We're in the office. It is 29 degrees. It's extremely sweaty. But just to, uh, just before we begin this episode where we're going to talk about spinoffs, mergers and acquisitions from big corporates spinning off particular divisions. I just want to give a little shout out to our summer analysts. We do a summer analyst training program where we get students in for 3 weeks over the summer. And week 3 of our first cohort is this week. And week 3 is banking week. So they have just come off the back of a 24-hour M&A challenge where I set them up with a potential pitch. And they have to go away and create a financial model, full 3-statement model, merger model, and they have to turn it into a pitch deck and submit it within 24 hours. Guess, guess who's— guess what the latest someone stayed up until was?

I'm going to go for pretty— there's going to be at least 1 or 2 that went the full way through and probably had close to no sleep at all, I would imagine.

Yeah, I mean, these cannot be independently verified, but someone did say that they didn't have any sleep at all. So look, we're gonna be judging these pitch decks and we're gonna see what the correlation between amount of time spent and how tired you get at 5 AM in the morning and quality of pitch deck. We'll report back next week.

Well, I'm assuming though, there's a lot of face time in a corporate setting. They're visibly being seen. So in your case study though, that I would hope then that they were— their quality should be better because they're not fulfilling the optics here. They're just trying to do a good job.

Yeah, I've seen some of the models and I've seen some of the pitch decks and they look fantastic. So it's a great job and we've compressed a kind of week's worth of M&A pitch experience into a very concentrated 24 hours. So well done to everyone that took part in that.

All right. Well, look, I know you had 4 or 5 examples kind of queued up and we'll definitely go through all of those, but I thought perhaps there's one I've included in today's newsletter, in fact, which is Sanofi, the big French pharmaceutical company, and about a spin-off and wanted to start with this one perhaps because it's just quite a large figure. We're talking 20 billion. For a consumer care spin-off. So I wonder if, um, I could get your thoughts on that one.

Yeah, absolutely. Give me a curveball 5 minutes before the podcast. Look, this is— this actually is very online with some of the different reasons we're giving for a company spinning off an asset. So over the next, uh, half an hour or so, we're going to go and look at different strategies that large companies have for getting rid of non-core assets, different strategies and different reasons. And actually, the first reason that I had, and I gave a different example to the one that you were suggesting, is the first strategic rationale for a spinoff is that it— that unit is a non-core business. Now, non-core business within a larger company can mean all sorts of different things. So I think we mentioned a few months ago on the podcast, we mentioned Unilever spinning off its ice cream division as it was no longer considered to be core. And a core business is an element of the business that is a real revenue product and most importantly for public companies, a valuation driver. So when there is an element of a business a division, a department, a geography that is considered to be dragging on the earnings per share, dragging on the share price performance, then it comes into question as whether that unit should be disposed of. And this is kind of what we are seeing with the French drugmaker Sanofi. And the headline that you gave me, and that's in the newsletter, is that Sanofi seeks initial offers for its $20 billion consumer arm. And this has actually happened with a few of the pharmaceutical companies, Johnson Johnson being the biggest one, where these companies grow and they're initially pharmaceutical companies, and then they gain, they add on a consumer element to become vertically integrated. So they produce the pharmaceuticals and then they sell the pharmaceuticals as well. And then during a different stage in a company's strategic cycle, they realize, wait a second, maybe that strategy of getting bigger and getting vertical isn't the most efficient. Can we skinny down and can we get rid of a non-core element without destroying too much value in the business? Now, obviously, the reason why companies have lots of different divisions is because they can benefit from economies of scale, as we've discussed in the past, and synergies and cost benefits between the divisions. So in this case, Sanofi is making the call that carving off, carving off this $20 billion consumer arm is going to, in the long term, realize much better value for its shareholders. So just to give a little bit more detail, this $20 billion, it's not yet been confirmed. They're looking at it at the moment. It's likely that there'll be quite a lot of private equity interest. We've got Blackstone, CVC, TPG, and France's PAI Partners all in the mix. Another option would be to spin it off, turn it into a separate entity, and IPO it. And by the way, Sanofi probably still going to retain a minority stake in the business and may have some relationship with that business going forward. But we've still got a lot of work to do to figure this out. And quite frankly, it's Bank of America, BNP, Goldman Sachs, and Morgan Stanley who are going to be helping Sanofi. So we don't need to do the hard work. And then Sanofi has also got Barclays, Deutsche Bank, and Jefferies to serve as the book runners if there is indeed an IPO. So I think that's fair to say that they've covered all bases, but this is a really interesting, very live and extremely big example of hiving off, getting rid of what we would call a non-core asset.

Is, is there a, the way you described it, is there a normal life cycle then of a reference point where, or pre or precedence of they have a pharmaceutical company, they then go vertical, like you say, to then sell to consumer, and then there's a natural life cycle where they, this is quite common, a spinoff happens, or is there success stories where they could dominate throughout all divisions.

It's a really hard one to answer that. If so, companies and strategies around companies trend towards getting bigger. So growth is the goal, right? So top line growth, bottom line growth, earnings per share growth. And when there's not much of that, then new divisions are formed, new growth opportunities are sought, and companies swell and they swell and they swell. And this is basically the story of spinoffs. Companies swell and swell and swell, trying to find areas of interest, trying to find areas of profitability, trying to find areas of diversification. Now, it's likely that as you go through this growth stage, there will be elements of that strategy that turn out not to make as much sense as other elements. So let's just take a totally random company. You might build up 3 or 4 different divisions, 2 or 3 of which have loads and loads of synergies between the 3. There's cross-selling opportunities, there's manufacturing synergies, there's brand synergies. And then that 4th kind of sticks out like a bit of a sore thumb. That was the one that didn't work. So it almost is a byproduct of scale. And you see this in all sorts of different industries where you get big, you skinny down, you get bigger again, and you skinny down again. So it is part of the natural cycle of business, I think, at this size of company that we're talking about.

Do you think then on the back of that technology, big tech, so your Googles, your Alphabets, we've spoken about this before, like YouTube as a separate entity. Is there also a degree of forced necessity through the regulatory environment put on companies to spin off?

Yeah, it's really interesting. So with a company like Google that has 3 or 4 separate units that could, could, that could certainly stand on their own two feet as significant players in the US. For a company like Google, yes, we talk a lot about regulation and the increased scrutiny that these companies are under. I think the bigger incentive from a shareholder perspective is if we believe that the sum of the parts are more valuable than the whole. So if I'm an activist shareholder looking at Google and I perform my valuation analysis independently on YouTube and on Google Search and on their AI and on Maps or whatever it might be, their different divisions, and I come out with a cumulative sum of the parts market cap that's 2 times higher than Google's current market cap, then everyone will start getting interested. Regulation tends to be reactive. Money does tend to talk a lot more, and we've seen this in a, in a number of environments. Whether it's going to happen with Google, there is a lot of crossover. There's a lot of synergies between their different products. There's a lot of verticalization of what they've done. So I don't see it happening anytime soon, and I don't see many of their businesses being quote unquote non-core, at least any of their big businesses.

Okay. So before I threw in that kind of last minute story, I know you did have a non-core business story lined up. Is there any you want to go into that one still, or should we move to the second?

My, my non-core story that I was going to bring up is actually smaller, it's less interesting. Uh, but the story that I was looking at was a company called RXO agreeing to buy the UPS unit Coyote Logistics for a billion dollars. Now again, the reason why this is interesting is that UPS acquired this business. UPS is the big parcel delivery company noted for its brown trucks in the US. Acquired UPS in 20— acquired Coyote in 2015 for $1.8 $1.8 billion. So it bought this company for $1.8 billion as part of an expansion plan, as part of a diversification plan, and it just didn't work. They have admitted, UPS have admitted that they didn't really understand the cyclicality of the business that they were buying. In fact, revenues have gone down since 2017. EBITDA has gone down. And very interestingly, RXO picking up what seems to be a bit of a bargain. So they're buying a company that's got $3.2 billion of revenue. This is Coyote, the division of UPS that's being spun off, $86 million of EBITDA. So it's being bought on a 0.3 times revenue basis and an 11.6 times EBITDA basis where RXO currently trade at a 30x EBITDA basis. Now that might seem very complicated, but what this actually means is if your stock price, if your trading multiple is higher than the trading multiple of the company that you're buying, or than the EV EBITDA of the company that you're buying, it is expected that acquisition is automatically going to be accretive because you're buying cheaper profit than you generate yourself. So I'm highlighting this story, A, to show that companies get it wrong. UPS failed in this acquisition. They bought it for $1.8 billion and they're selling it for a billion. But also, if you are a buyer and you're looking at cheap assets, go hunting for a really non-core asset that UPS, quite frankly, kind of desperate to get rid of, and you might end up picking a bit of a bargain.

So I'm assuming then part of the responsibility of it failing falls on management and strategy. Does any of that responsibility— if I was the UPS person, I'd say, well, I was advised by the bankers and they did not flag this, they were X bank. And does that then, um, I don't know, compromise relationships for future deals and things like that? How does that work?

Yeah, it might sour a relationship or two. There might be a reputational issue with regards to the division at that particular sector coverage team that's covering UPS. But again, M&A advisors are guns for hire. They do, they suggest and they advise and they recommend and they probe and they want the deal to be done. But at the end of the day, the responsibility lies on the management team. They are the ones that are paying the money. They're the ones that are dealing with the integration. And if the deal fails, it rarely tarnishes the brand of the M&A bank that originally did that deal.

Makes sense. Okay. So then ABN Amro and HSBC's German unit. I know there was another headline this week. So what was that one?

Yeah. So actually HSBC, this is, this actually leads into number 2. Which is spinning off a geographic, geographically insignificant or no longer core elements. So firstly, we've got non-core businesses, non-core business units, as we saw with Sanofi. Now we're going to talk a little bit about non-core geographies. And actually HSBC is a brilliant example of that bloating and shrinking that we've spoken about. And in HSBC's case, it's the bloating and the shrinking geographically. That's most interesting. So HSBC had this strategy in the early 2000s, late 1990s to become the world's local bank. I think it was a great, great tagline, great brand identifier, and it bought banks. It's much easier to buy banks in different geographies because they've already got a banking license. They bought banks in so many different countries, right? I think they had banks in 80 or 90 countries around the world, everything from Mexico to Mauritius, and everywhere in between. And then obviously post-financial crisis, the going got a little bit tougher and they had to start thinking a little bit more carefully about the geographies that, A, weren't as profitable. So there will be, just to give you a bit of background and how these things work, there will be a strategic review within a bank like HSBC or within a large company usually working with management consultants. So I remember HSBC, their favorites were BCG, and they would get together and go, all right, our profitability's down, our revenue's flatlining, our earnings per share look pretty average. What are we going to do? And we'll work and work and work and work and do lots of spreadsheets and lots of analysis and go, these are the divisions and these are the countries that we need to get out of. And the headline this week was that HSBC is basically pulling its wealth management and private banking arm from Germany. So this is a spinoff of their non-core geographic or non-core German assets that actually to other organizations like ABN Amro, Dutch bank, are much more central to their strategy. Skinnying down. I think HSBC is now in 55 countries, something like that. And it's just, again, it's part of the wave of growth and shrinkage that we see. HSBC, I think, is probably just a bit more of an extreme example.

Okay. And then you said that leads us into then your second.

So let's talk, I mean, let's talk a little bit more about geographies. So the other article that I wanted to do, it's actually my third point, but we'll go back to the second point. Uh, my, uh, the complex, getting out of complex geographies. So the headline that I had before the HSBC headline was that Orange, the telecommunications company, was said to mull a 40% stake sale in their carrier exiting Mauritius. So who'd have, who'd have known that Orange were in Mauritius? This is a very quick story to say, look, back in the day, back in 2000, they bought the stake in Mauritius Telecom for 261 million. That's in 2000. And then one thing led to another and Mauritius Telecom actually rebranded from Orange back to Mauritius Telecom. So their brand was no longer visible in Mauritius. They only owned a 40% stake. So they didn't have strategic control. And so again, when it comes to strategic review of our geographical presence, is there any synergies here? Is there any benefit here? Is this just a bit of a legacy move that we made back in 2000? Now's the time maybe to spin off and become more focused. And by the way, these tougher times, cost of living crisis, potential recession, higher interest rates, it really sharpens the attention of executives within these large companies to go, all right, once what, you know, what that was a nice to have when the going was good, but now things are a little bit tighter. Margins are a little bit more compressed. We are struggling a little bit more. Shareholders are going to be much less up for us remaining in places that are considered to be non-core. And that's why in the last week, we've had so many of these stories about spinning off non-core assets and non-core geographies.

Yeah, no, makes, makes a lot of sense. I was just thinking about the general economic cycle and how the, you know, the kind of theory of it being somewhat a necessity where human behavior would dictate this pursuit of growth. Like you say, you get a bit fat and then you trim down And then it kind of goes in this continuous ebb and flow. It seems very consistent and it makes a lot of sense as you describe it. So there was another one though, looking at geographies where it was Generali and talking about Turkey and the Philippines. So was that a similar case? Is it just a case of complex geographies on this one?

Yeah, exactly. It's exactly the same. So Generali, the Italian company, set to sell its units in Turkey and the Philippines. Again, you sometimes look at it and you think, why did they get into those countries in the first place? What was their rationale behind this expansion? And yeah, the thing about strategy is that at the time, things can feel very sensible and very rational and very right. Hindsight creates 20/20 vision, and it might turn out that that decision that was made in very good intelligence and very, very good faith is no longer the right decision to be made. So I think one of the key elements of strategy is, is, and management and leadership, it's just acknowledging when something hasn't worked or acknowledging that your, your logic was right at the time, but markets have changed, circumstances have changed, and you have to change and update your framing of that particular business unit.

Just on the strategy side. So if you were sitting on the side of the business that you want to spin it off, it's no longer seen as a productive part of your business. And then like you said before, there's these other people going around hunting for value to add into their own mix. How do you negotiate on the side of the seller to ensure that you can maximize your payout, if you like, for what is otherwise something where everyone knows it's not part of your core strategy and you want to get rid of it. So what do you lean into?

Well, I think you said it best, or you gave me the right article with the Sanofi deal. Make it competitive. So Blackstone, Clayton, Dubliner, and Rice, CDR, CVC, TPG, EQT, all of the acronyms, PAI, Advents, they're all in on this. They're all thinking about putting in a bid. And of course, on the sell side, on a sell side with regards to a transaction, the goal is to create competitive tension. I want to win this because I'm up against my arch rivals, and that's how you're going to get the value that you are going to get. I think the key again is making sure that this isn't a fire sale. And with, in the case of Sanofi, this is not a fire sale. This is a profitable, good element of the company that the team, the executives have decided that now is the right time to push ahead with that sale because the market conditions have recovered and there's a lot of dry powder in private equity. But you know, if private equity doesn't hit the mark, then we can IPO. So that's another element of competitive tension to really, really wring every single dollar out of this deal. So it's a great, it's a great example of how to create competitive tension in order to boost that price, hopefully for them above $20 billion.

All right. Okay. So your, your next strategic rationale then, please. Okay.

We'll, we'll cover a couple very quickly. So remember the first, we talked about non-core assets. The second, we talked about non-core geographies. The third is an interesting one. This is strategic rationale for spinoffs number 3, restructuring. So the headline that I saw, it's a brilliant case study. We're not going to spend too much time on it, but I'd recommend that you do if you're listening and interested. Casino sells Corsica unit to Rocca and Ocean amid debt restructure. So Casino, if you come across Casino in Europe and in France, the grocery store, No. Okay. I remember camping trips to France when I was young and there was a hierarchy of supermarkets. I liked Leclerc. I liked Auchan. Casino was a bit rubbish. So anyway, not that that should prejudice this story. Casino, the French operator of grocery stores, it basically over the last 18 months has been absolutely bombing from a financial perspective. It's been loss-making. It fell into And Fitch is one of the credit rating agencies that's been looking at this company. It fell into a sub-CCC- credit rating, which is called a restricted default, which is below any form of credit rating. I— this company is about to go bust and we are not, we are not giving it a credit rating. So there was this huge issue with Casino. It's massively indebted. It— so many of its superstores and its hypermarkets were loss-making. And in order to rebalance the company, in order to get it back onto a level playing field, there was a huge restructuring process that went on. Now, the majority of the restructuring process was what's called a debt-to-equity swap, where you take out a bunch of the debt in the business and you convert it into equity. So a lot of the debt holders suddenly become equity holders. At a very, very nice valuation. So that is one thing that happens, which normalizes the leverage position within that company, takes the debt pile a long way down. The next thing that they did was look to dispose of non-core assets in order to raise money to boost the coffers of this business and to dispose of those assets that are loss-making. And in the case of Casino, the French grocery store. It was their 12 hypermarkets or 12, no, 4 hypermarkets, 9 supermarkets, 3 cash and carries, and 2 drive-throughs in Corsica, which had revenues of €332 million, but they needed to be sold. They weren't making money. They were not core. And Casino's desperate for the cash. So this combination of the debt-to-equity swap, an actual equity injection and the selling of non-core assets is rebalancing Casino. It's actually been re-rated recently post-financial restructuring by Fitch. It's now been re-rated to a CCC+. Still pretty rubbish, but it's back on a slightly more even keel. So strategic rationale number 3, my gosh, like when the going gets tough, you're starting to think about selling assets. And this feels and is a lot more like a fire sale than the Sanofi deal that we talked about earlier. I reckon Auchan, which is one of the big French supermarket chains, it's probably going to pick up a decent deal here because any money is good money when it comes to a company that's about to go into default.

So if you were a good banker, then would you already have very close relationships with some of these other French competitors and already front-running it? It's almost like in a trade where you build inventory, you could have already putting stuff together before the request even comes, and you're proactively going to a client base saying, you almost like that, that tension you mentioned, it's almost like the banker can create it to even before the buyer interest has come to them.

Yeah, yeah, 100%. And this is the goal of a really good coverage team. So we've just finished, actually, we're about to release the last blog in a series of blogs demystifying investment banking. And the first 4 parts of the blog were on different product groups, M&A, equity capital markets, debt capital markets, leverage finance. And then the final piece that I've just finished is on coverage teams or sector coverage teams. And these teams are sector specialists. So there will be a sector team, a sector coverage team that is absolutely all over everything that is going on in the world of retail and supermarkets. So they will have known about the going south of Casino for a number of years. They will have the corporate finance director of Auchan on speed dial. They would've spoken about this over boardroom meetings and well over meetings in boardrooms and things like that. And this will be this will be a deal that's been long in the offing, that has been put together, A, out of necessity, but B, hopefully out of the real tactical nature of the sector coverage teams that are seeing both sides of the story and trying to match suitors together. So yes, it's all about the coverage teams. As I say, in, if you're looking at an investment bank floor, you've got product teams who are product specialists, but industry generalists. And then you've got coverage teams who are sector specialists, but product generalists, and you merge those two together and you've got a bit of a lethal combination.

Alright, so is there what, one more?

Alright, let's go on. Strategic rationale number 4, become leaner and prepare for a sale. Now this is a really interesting one. The headline from last week was Amex to buy restaurant booking platform Tock from Squarespace for $400 million. Now Squarespace, as many of you probably know, is the website creator design tools company that makes building a website super easy. It listed in 2021 at a market capitalization of $6.5 billion, and it has just been It's just been announced that it's been acquired, or it is being acquired by the private equity firm Permira for $6.9 billion. So IPO'd, share price did nothing, and now it's being sold. Long story short. And Permira obviously see a stagnant share price as an opportunity for them to get in on a really interesting company that's got a lot of growth potential that isn't fully being accounted for or priced in to the share price. As part of that, it's probably said, well, it's definitely said to the share— to the directors, the executives at Squarespace, look, what the heck is Tock doing as part of your business? You're a website design company. You are not a restaurant booking app, which is basically what Tock does. This is a non-core asset. You need to skinny down in order for us to feel like there's enough cash in this business for you to expand and for you to grow in the way that we want you to grow. So interestingly enough, again, Squarespace bought Tok in 2021 for $400 million. It's selling Tok, Amex, for $400 million. So again, it's been, it's not been a success. And there was probably again, good synergistic logic back in 2021. So a lot of Squarespace's customers were restaurants and small businesses that, that, um, that had online shops that sold food. And therefore maybe there was logic there at the time, but move on a few years. All right, the share price has done nothing. Squarespace hasn't become an everything app. It hasn't gone from being a $6 billion company to a $100 billion company like Uber, which has expanded into different areas. So let's skinny down, sell to private equity, and reset and refocus on our core mission.

To empower the management team to make those types of decisions, because I'm just thinking in my head, like, what— how long do you let it go before you kind of cut your losses, so to speak? So what Having you before have sat on some of the strategy side of these sort of deals, are you kind of doing litmus tests when you're talking to analysts to get a vibe of how they see your business and how they're valuing it? Are you talking to bankers privately in some sort of other type of service to get just advisement on the situation and not actually on the any outcome that you're thinking about at that time as a, as a service offering or How would that work?

Yeah, I think you're constantly battling against survivorship bias or against your desire to hold onto something that might be a losing asset because you made that decision back in the day. And it's a very common trading pitfall as well, right? But you are going to be seeing data and getting pressure all the time, whether it's an activist shareholder coming in and saying, look, it doesn't make sense that you've got this particular unit. Whether it's an investment banker that's met you now 4 times and told you that your share price on an earnings per share basis will get a boost if you spin off a particular division to another investment banker that says, hey, by the way, there's probably someone that's quite interested in that division. Do you want to start exploring it? The rest of the board, they've got a fiduciary duty to maximize shareholder value and shareholder returns. So they're going to be starting to think, ooh, you know, is this Tock thing, is this the right thing for Squarespace to be getting in? We thought at the time, armed with the information that we have back in 2021, that it was. Now we need to swallow our pride a little bit, and the pressure and the forces that are coming at us will probably make us realize that it's the right time to sell. And my gosh, in this context, when you've got a private equity deal on the table for $6.9 billion and they're definitely saying get rid of this company, you're going to get rid of this company.

Okay. And look, there was, there was something you mentioned to me before offline, which was conflict of interest. So I don't want to miss out on that point as well to wrap up.

Yeah. So moving to getting rid of an element of your business, you're a large company and you're spinning off a unit of your company. This is, this is a slightly less common one, but I saw this article earlier on this week and I thought I'd add it in. So Klarna, Klarna, which is the big, big payments company, buy now pay later, to offload its checkout business in a $520 million deal. This is super interesting. So Klarna obviously offers its buy now pay later services. You see it all over the place, but it also had a checkout business, which was quite kind of like a rival to Stripe. So actually, when you did the checking out process, it could be powered by Stripe, or it could be powered by Klarna Checkout. But that was causing a conflict of interest, because the buy now pay later arm of Klarna, its biggest clients were the likes of Stripe and Adyen, different checkout providers, right. Different payment solutions providers. So it was causing this weird conflict of interest where Klarna's clients in one business unit was also its competitors in another business area. And again, in order to focus on the big, big profit driver for Klarna, which is its buy now, pay later function, it decided to get rid of that conflict of interest, sell the the checkout business, which it's really interesting. The CEO and founder of Klarna did it with a really, really heavy heart, said, look, I love this checkout business. It's a brilliant business. I don't really want to get rid of it, but I think it's the right thing to do to take Klarna to the next level. So it's being bought by a consortium of entrepreneurs and investors for $520 million, and that's now going to become probably a big client of Klarna because they now have got rid of that conflict of interest and they can use this new independent company called Checkout, let's call it, as a vehicle to host their buy now pay later services. So just a really nice example of rational, quite hard, clear-headed strategic thinking from the team at Klarna.

Yeah, and I like the framing there just to get good value. Out of the deal. Such a great, fantastic business. I'd, with a heavy heart, I let it go. So, you know, get your best bids in now, please.

Yeah, yeah, absolutely, absolutely. But I, I do, I definitely empathize with the identity that founders ascribe to certain parts of their business. It is, it's like one of their babies, and this is, this is killing your babies, but it has to be done.

I'll accept that analogy for its intention of talking about conflicts of interest, strategic rationale. So the other thing is I understand you're flying out to Nantucket in the States.

Ah, yeah. Look, my private jet taking off today. Jeffries have invited me to Nantucket and this is just going to finish with a bit of Big money, big money story. So Jefferies Consumer Conference has been going on in Nantucket, and this is where Jefferies CEO comes on his 164-foot mega yacht. Actually doesn't look that big if you can, if you see the photos, no offense, Richard Handler, the CEO of Jefferies, but he basically rents out the whole of Nantucket, which is this lovely tourist sleepy harbor town, very old money, East Coast lobster roll type thing, uh, and hosts this big, getting bigger conference where they're matching executives from Walmart, Hilton, Macy's, et cetera, big retail names with money managers from the likes of Wellington, Fidelity, T. Rowe Price. And guess who sits in the middle? Jefferies. And interestingly enough, I'm just going to finish. There's a lot of good anecdotes around how much money is being spent and all of this kind kind of stuff. But I'm just going to finish off the reason for— with the rationale behind hosting such an expensive conference. So Carver, which is one of our big case studies when we do IPO simulations— Carver is a healthy fast food Mediterranean chain of restaurants based in the US. It came— Carver came to this conference last year, and 3 months later, who did the IPO with? Jefferies as the key bookrunner. So Jefferies say they get 4 or 5 mega deals from this conference every single year. And actually the lawyers, Latham Watkins, who also come, say that they get 2 or 3 mega deals. So yes, it might cost $10 or $15 million to put this thing on, or whatever the number it is, but if you can get a bookrunner on the biggest IPO of the year, which it was up until that point, it all becomes worth it. A bit of risk-reward and a lot of lobster rolls. Okay.

Well, when I've got 10 million knocking about, you'll be the first man I call, Steven.

Thank you very much, Anthony. I appreciate it.

All right. That is it for this episode. So if you enjoyed it, remember to give us a rating if you haven't already done so. I do know that a minority of listeners who are brand new, who don't follow already, if you hit the subscribe button, hit the bell icon, you'll get notified when every episode goes out. And as a reminder, typically there's two episodes a week, one with Steven on corporate finance, and then the other with our co-founder Piers on markets, typically at the end of every week. So bookend your week and get in the know on both ends of the finance spectrum. All right. Thank you very much everyone for listening and see you next week.

Thanks, Ant.