The Rise of Jefferies & A Big Week for Private Equity

Hello and welcome back to The Deal Room. And last week was a great week in IBD and deal news flow, and we're going to pick the best 4 stories, ending with a little good week for and bad week for in the world of private equity. So we're going to speak about Jefferies bumper earnings. Stephen's going to do, as he always does, an excellent job, I'm sure, of breaking it down, what it means, and And then a deep dive into poison pill acquisition defense mechanisms. So I said defense because we're also going to talk a little bit of basketball later as well. But the reason why we are talking poison pills is because of Southwest defending against an activist investor, Elliott Management. And then we'll take a look at the, what is an ever-increasing beast of SpaceX, which came out with a valuation most recently of $210 billion, achieved after its recent tender offer. And then, as I said, we're gonna finish up a little bit of basketball because the Boston Celtics have won the NBA title, but now they are up for sale. And we do talk a lot about sports and the intersection with business on this podcast, a fair bit. So we'll have a look at that as well. But Jefferies looked good on the surface. Tell me more, Stephen.

Yeah, thank you so much, Ant. And yes, it's been a great week for news. Great 10 days for news in the world of M&A and all things IBD. As always, because you guys get your podcast out a little bit earlier than ours, you've taken the general election. I'll give you that. I'm sure you covered it, covered it very, very well. We will touch upon the general election right at the end. Stay tuned. But first we're going to cover Jefferies. Now, Jefferies, we spoke about last week, if you remember. So we spoke about it right at the end of the podcast, their big Nantucket showdown with retail and consumer businesses. And that was a place where movers and shakers did their moving and shaking and got some deals done and spoke business and did all of that kind of thing. And it's obviously working because Jefferies absolutely smashed their Q2 profit estimates. So second quarter ending 31st of May, up 59% in terms of revenue on the same time a year ago, the same period a year ago, $1.65 billion total revenue. Now remember, Jefferies is a kind of pure-play investment bank. It generates the majority of its earnings from the IBD division and from its capital markets division. So within the investment banking division, which we cover so often on this podcast, generated $803 million of revenue in the quarter alone. $284 million of that was advisory. So that's M&A. $455 million was equity and debt underwriting. So if you're a little bit confused about all of these terms, we've done podcasts that focus on each of these areas. And we also on the website have a demystifying IBD blog series where we go through each of the different divisions. So please do check that out. Yes, Ant.

I was just going to say, like, actually on those two metrics, I just had a look at the investment banking scorecard as you were going through those numbers. And just to sort of show how well Jefferies are doing on global ECM bookrunner ranking, so on the equity capital market side, they are now 1, 2, 3, 4, 5, 6, 7, they're 8th. Last year they were 14th. They've gone from 14 to 8. And on the M&A advisory side, they are now ranking 9 from 16.

It's, so this is really interesting and Jefferies occupies a pretty interesting space in between the universal banks, the bulge bracket banks, and what we would call the boutiques or the elite boutiques. And they're kind of halfway in between. They're big enough not to be an elite boutique, but they're not a universal bank. You wouldn't see a Jefferies high street bank, you know, as you walk through London. So they occupy this interesting space. They're obviously very good at what they do. Now, the reason why they've had such a stellar performance over the last 3 and over the last 6 months, it's firstly because the market has bounced back. You know, if you read any FT newspaper or read any Bloomberg front page for a few minutes and you'll realize, look, the market's back to an extent. Most IPOs in Europe since 2021 might not seem like a long time ago, but 3 years is a long time in investment banking. So the market's up, but also Jefferies is doing well relative to competitors. There's a couple of reasons for this. So remember, $803 million of net IBD earnings, $691 million of capital market sales and trading. Earnings. Now, Jefferies is on a roll. It's relatively aggressive in terms of the way that it's hiring. And again, remember this from a careers perspective, look at the organizations that are hiring at the top. They'll probably end up wanting to hire at the analyst level as well to fill the gaps. So Jefferies has just poached a Bank of America banker and a Citi, what they call rainmaker. I.e., dealmaker that brings in dollars, brings in money in their European M&A push. So they've hired Berger Berendez from Bank of America, who's one of the chief rainmakers, dealmakers in Europe. And he's going to be Continental European Head of M&A. And then Michael Borsch from Citigroup, and he's going to be split. He's going to be splitting his time between London and Hong Kong, and he's going to be Head of Transportation and Logistics. Banking. So they're making a really big push with the dealmakers, with the rainmakers. From a career perspective, that's interesting, but also this is why they're growing. You poach a dealmaker from a Bank of America or from a Citi, and they bring their Rolodex, or they at least bring their expertise and their reputation in the market. There's often periods of time that they can't compete, and there's gardening leaves and things like that. Where you have to not poach any of your clients and not do any work for a period of time. But that is going to start having a material effect, especially in Europe. And then the third headline that I read that's related to Jefferies and its success is, it was in Bloomberg a couple of days ago. It says big bank dealmakers will keep moving to boutiques, says the founder of PJT partners. Again, slightly talking its own book. It's a boutique investment bank. It's a guy called Paul Taubman. And now Jefferies is not a boutique, but it is in a bulge bracket and it has a slightly more entrepreneurial cut and thrust mentality relative maybe to the Bank of Americas and to the Citigroups. So again, the article's basically saying, look, these elite boutiques, these organizations that aren't, that weren't ever considered to be in the top 10 are now growing at such a rate because their expertise is focused specifically on advisory, specifically on capital markets. The bureaucracy levels are lower and it's probably a slightly more attractive place to work in terms of deal split and bonus pool and things like that. So again, let's think about this from a career's perspective. I'm looking at an image that has got a bunch of different elite boutique organizations, and you can see on it Evercore and Mollis and PJT and Guggenheim and Lazard, Centerview, Catalyst, and PJT as well, and Rothschilds as well. Sorry. That's a lot of organizations that are going to be increasing their hiring at the analyst level. So don't just think about, gosh, it's gotta be JP Morgan or it's gotta be Goldman Sachs, or it's gotta be Citi. It's gotta be one of the big ones. These guys are, well, PJT Morgan has tripled its headcount since 2015. From a career perspective, go where the hiring is. And these organizations are building out their analyst programs and building out their internship programs, especially, well, they've been quite established in the US, but especially now in the UK and Europe.

So, so just think of it from a student's perspective then. Is obviously JP Morgan has that kind of factor that most people will know it, but do those bigger banks also have, at the moment at least, more structured training programs because they've been doing it a long time? Would that be a benefit of that as an incubation period of kind of learning, and then you go? Is that way, or is it the fact that now these other elite boutiques can compete, and they're quickly rolling out these programs to attract them from a grad level, or are they still kind of picking them out and then transferring them over from—

Yeah, yeah, I think, I think the, the bigger— the elite boutiques have extremely good internship programs, graduate programs, structured training. You know, if you're getting trained at Evercore or at Rothschild or at Moelis, you're going to have the best training that there is, you know, side by side with Goldman Sachs or JP Morgan. There will not be a difference. Now, obviously, if you go the next tier down, specialist boutique, mid-market, smaller market M&A, the headcount gets below about 500 or 600, then you have to think to yourself, all right, is this the best launching off spot. But in terms of the elite boutiques versus the bulge bracket, probably not much to pick from a training perspective. From an increase in hiring perspective, I'd say the elite boutiques have it at the moment, so definitely one to consider.

Yeah, interesting. All right, so we mentioned at the top of the show something called a poison pill. Uh, I know we've probably spoken about this before, but it was many episodes ago, and conscious of the fact that A lot of people might be thinking, what on earth are they talking about? So I know as ever, that's almost like the finance theory and it's going to be in a wrapper of a current story. So yeah, hit me.

Yeah. Yeah. So this is Southwest Air adopting poison pill to counter activist investor Elliott. Elliott's a very famous activist investor. So let's talk about, let's give you a little bit of a setup of the story. So Southwest Airlines, obviously US airline, has been underperforming over the last few years, and Elliott Management have built up an 11% stake in the carrier, and they have been very, very scathing about the way that this company Southwest has been managed and the unwillingness of the CEO to adapt and to change. I think the phrase was, poor execution from the CEO, Bob Jordan, and a stubborn unwillingness to evolve the company strategy. So that's what Elliott is tabling, saying, look, your financial performance is lagging. Your company culture is very insular, and there's a stubbornness and an unwillingness to see different perspectives that are really troubling to an investor, an activist investor that's built up now an 11% stake in the company. So this is the way that it works. If I'm an activist investor, I want to change the company from the inside. So I build up a stake in the company and I agitate for change using my shareholding as the entry point, as the foot in the door, but also as the key motivator for change to happen. So Elliott could build up that stake before the poison pill came in, Elliott could build up that stake from 11 to 15 to 20, and then will be forced at some point to launch a hostile takeover, which is something that obviously Southwest doesn't want. So this is the way that activist investors work. They build up a stake, they agitate for change, whether it's board seats or whether it's a change in company strategy or whether it's the removal of a CEO. And then if that happens, well, they're happy. They're hoping that the share price will go up and they benefit from it. Now, if I am the board of Southwest and I see Elliott slagging me off, building up this 11% stake, basically saying, look, the directors are rubbish and the executives are even worse. What am I going to do? I'm going to want to protect and defend myself against the potential that Elliott's going to keep building that stake. Into a position that it's going to launch a takeover bid. And this is where the concept of the, uh, the poison pill comes in. So Southwest have announced very recently in the last few days what's called a shareholder rights plan, which is the formal term for a poison pill. And a shareholder rights plan is a plan that's put in place to defend against an activist or defend against a hostile takeover. Now Southwest Airlines, the directors do not want the takeover. So they're implementing the shareholder rights plan. Take a step back. What is a shareholder rights plan? Devised in the 1980s, uh, by a bunch of lawyers in the US in response to all of the hostile takeovers that were going on in the great private equity vampire capitalist boom best summarized in Barbarians at the Gate. So this was a defensive strategy aimed to protect companies from hostile takeovers of the likes of Carl Icahn, who could be seen to be a bit of an asset stripper. The most common type of a poison pill is something called a flip in, flip in. And it's basically, it's executed by initiating a shareholder rights plan where more shares are issued to all shareholders except the shareholders that are building up their stake. Now to bring it back to Southwest Airlines. So this is how it works in the context of Southwest. So Southwest is going to issue one right, quote unquote, right, for each share of common stock under the plan. So everyone is going to get a right that sits alongside one for one, every share. This right is going to run for a year, and this right becomes actionable when a shareholder or a group of investors accumulate over 12.5% of Southwest common stock. Remember, Elliott's got 11% at the moment. As soon as Elliott goes above 12.5%, all rights holders that are not Elliott, that are not the company that's got over 12.5%, are able to purchase new shares at a 50% discount. So if you think about this as a defensive strategy, if Elliott continues to push above 12.5%, It can only buy shares at the full price, but at the same time, its shareholding is getting diluted by other shareholders buying at a 50% discount. So it's making it extremely expensive for Elliott to get any further up the acquisition or the takeover ladder. So it's a really interesting approach as a defensive strategy. Again, poison pill. Shareholder rights plan, flipping. Those are the terminology that we need.

So as the activist, I've already accumulated, you say 11% stake. So I've already put up some serious cash to get into that initial position. So I'm assuming this is like a deterrent tactic so that I could just keep buying knowing they're going to dilute, but I can just go in with heavier firepower. But this acting as a deterrent for me not to do that. So these activists, how do they— can they get around the poison pill other than just outgunning them with cash? Or because it seems like I'm already committed, let's say billions of dollars now, and then they pull this out, but surely I know this is going to come when we get to a significant shareholding.

Yeah, it's a really good point. And most of the time a poison pill is initiated as a negotiation tactic. So there was a stat that between 1997 and 2001, very specific period that I found out, only 1 in 20 poison pill responses actually prevented a takeover. So they're a bargaining chip. And I'm going to use the famous example of Twitter and Elon Musk, right? So on April 14th, 2022, Musk made his famous unsolicited offer to purchase the company. Remember, he was building up that stake. He rejected a board seat and then he went, all right, I'm going to buy the whole thing. In response, Twitter's board responded with a poison pill to resist the hostile takeover. But then soon after, they unanimously accepted the buyout offer of $44 billion. So it's basically like, look, You can't buy us on the cheap. You can't just keep buying on the market, on the exchange, just getting a higher and higher stake and then getting it on the cheap. You can come back to the table and go, all right, $44 billion for Twitter, take it or leave it, but you can't do it incrementally. And this will be exactly the same in the case of Southwest and Elliott. If Elliott come and say, look, we'll buy the whole company for, you know, for however much is enough. Then the poison pill will get taken away and, you know, the directors will unanimously agree. So it's really, really interesting and it's definitely part of the toolkit of negotiations when you do have a potential hostile takeover.

So setting up the poison pill, my final kind of question, who makes the money on the fees here? Is it the lawyers or is it the bankers?

It's going to be the lawyers. I mean, in fact, the lawyers actually were the ones that draft, that created the poison pill mechanism. It was Martin Lipton of Wachtell, Lipton, Rosen Katz in the 1980s. So this is a legal structure and they would've made a lot of money from this. Do banks get involved? Possibly from an advisory perspective. Yeah. What should you do when there is a hostile takeover going on? Certainly not from a drafting of legals perspective.

Is there a kind of A relationship that exists then between banks and law firms whereby there isn't a formalized agreement, but there's certain banks that will work with certain law firms and they interchange business naturally.

Oh, 100%. I think, I think I was saying this a couple of weeks ago. The, the biggest, so the clients of the banks tend to be the lawyers and the lawyers will wine and dine the banks. Because the banks get the first piece of the pie in terms of the advisory mandates, and then lawyers are appointed soon after. So we used to have 3 or 4 firms that we did all of our business with, and we would be HSBC plus, you know, a Magic Circle firm or a Silver Circle firm. And even, you know, we, we mentioned it last week on, on when we were talking about Jefferies. Jefferies came to Nantucket with Latham and Watkins. As a little bit of a double act to talk about the legal and the financial ramifications of going public.

So let me get this straight. The bankers are taking out the companies who want to do the deal. The lawyers are taking the bankers out because they want to get on the coattails of the deal.

Mm-hmm. At the bottom of the food chain, and I don't know if this exists anymore, someone might be able to write a comment. At the bottom of the food chain was always the printers. So the printers, you know, when there's a prospectus to be made, there's a lot of money in the printing costs. So you used to have these firms of printers that were desperate to get on the next IPO prospectus or whatever it might be. And they would take the bankers out and use their corporate cards very nicely.

Really?

Yeah. You would've never thought.

Okay. All right. Well, look, let's move on because I know we've got two more to go. So SpaceX update on their valuation. So how has it got to $210 billion?

Oh gosh. All right. So this is the headline came out last week, SpaceX tender offer. This is the offer of the offer that existing employees that own share options in the company can sell their shares through this tender offer. And this is often a good opportunity to value a private company without there being a formal investment round. So SpaceX tender offer said to value the company at a record $210 $1 billion, which places it in the top 5 privately listed quote unquote startups in the world. So I'm going to do a little quiz. Can you name the other 4? And can you name the other 4 in order?

Well, I'm going to, you know, full disclosure, I've, uh, I've seen your list. So all I'm going to say is that definitely OpenAI is going to be in there for sure. So yeah, I'll leave it at that and let you disclose the rest.

All right. I can't believe you snuck a peek at my notes. Unbelievable. Fair. All right. So in number 5, in 5th place, and we've spoken about a lot of these companies quite a lot before. In 5th place, Shein, $64 billion valuation. In 4th place, Stripe, $65 billion valuation. In 3rd place, OpenAI, $80 billion valuation in February 2024. In second place, SpaceX, July 2024's $210 billion valuation. And in first place, despite a bit of a valuation haircut, $268 billion valuation for ByteDance. So these are the world's biggest privately held companies, and a lot of them are agitating or starting to think about an IPO. You know, Shein's obviously not a million miles away. SpaceX has been been on the roster for a couple of years. Stripe's been sniffing around, waiting for the right time. But what I found really interesting about this story, obviously that is a lot of money, right? $210 billion. And remember the original employees. In fact, most of the employees of this company, SpaceX, will have share options and some of them will have vested. I, you've held, you've been at the company long enough to execute those options and sell those shares, and some of them won't have vested. And if you get in early at one of these hypergrowth companies, your share options will be worth— will make you a very, very wealthy person. So I was just doing a little bit of analysis and I was thinking, all right, $210 billion valuation. How many people work at SpaceX? So 13,000 people work at SpaceX roughly. At the moment. So that is a valuation per employee of $16.2 million. Not saying that every employee gets exactly the same, an equal slice of the valuation. It starts to make you think about those employees, especially those that got in early from a share options perspective. That's not bad. But then I went a little bit further. I looked at OpenAI. So OpenAI's got an $80 billion valuation, but only 1,900 employees, although it's increasing that relatively quickly. That is a valuation per employee of $42 million. Again, if you're getting in early, there's going to be enough food for everyone to eat from a monetary and valuation perspective. But then I went even deeper and we spoke a few weeks ago about Mistral, the French AI company, and I think we took a look at their team and thought, gosh, there's only a few employees there. Well, in fact, there are about 63 employees at Mistral at the moment, and it's got a $6 billion valuation. So that is $95 million of valuation per employee, which is total madness. Now, there's one company that's got a higher valuation per employee than Mistral, that I was researching. What do you reckon it is?

Well, there's a, there's only one company that you can talk about these days. And looking at the hockey stick chart, I'm assuming it's got to be Nvidia because it's gone from like a couple of hundred billion to north of 3 trillion.

So you are absolutely right. So Nvidia's market capitalization, when I did this little bit of work yesterday, 3.16 trillion, and it's got about 30,000 employees. That is $107 million of market capitalization per employee. Now I'm overwhelmingly impressed with any company that gets to a $107 million market capitalization, right? It's a massive achievement. Nvidia's doing that on a per-employee basis. And if you think about it, Nvidia's hockey stick, right? So 2 or 3 years ago, you would've had to have given a fair number of share options to convince the best engineers to come on board because the share price wasn't that high. The valuation wasn't that high. So those people that got in even 2 or 3 years ago are sitting on an absolute gold mine. And also Nvidia's public so they can sell their shares. Unlike these tender offers that happen with private companies, it's quite remarkable.

Could you also be greedy, take those like inflated share options that have gone astronomical and then go, well, every other big tech company is gunning for my expertise because we are the undoubted market leader, whether it be in the hardware part or the software integration part. And you go to your employer knowing the stats you've just said and gone, well, I can just jump ship and go to AMD if you don't lock me in for some of that 107 slice.

Yes, there are, there are so many tactics, especially when you become valuable as an employee within the marketplace. There is some, there is some, there is a word of caution though. So I was hearing a story yesterday about a, about a senior banker at a, at a big big bulge bracket bank that was getting a lot of interest from other organizations. So went back to their HR team or their senior management team and said, look, someone's just offering to pay me twice as much as I'm getting paid here. I love this bulge bracket bank, but I've gotta think about this offer. Now the bulge bracket bank comes back and says, all right, we'll match that as long as you stay here. 6 months later, there's an internal review of costs. And this person is now seen to be too expensive. So they get rid of him. So sometimes you can slightly overplay your hand and you don't necessarily want to be the outlier within an organization, even if you think that you played a blinder from a negotiation perspective. So look, you know, I think a lot of analysts or students listening won't quite be at the stage where they can command to create a nice competitive process. But when you get there, which I'm sure you will, just heed that word of caution. Yeah.

Good lessons. All right. And then talking some basketball, NBA team Boston Celtics.

Yeah. Let's bring this to a close. Let's talk about Boston Celtics to be put up for sale after winning the NBA title. Now, as you know, as a basketball player yourself, the Boston Celtics recently won the NBA title for a record 18th time. Can you name, can you name any of the other top 5 all-time, um, teams that have won the NBA the most?

Yeah.

So let's see how you get.

So, so basketball is dominated by just 2 teams when you look at it in terms of the modern and historical game. It's the Boston Celtics and the LA Lakers.

Right.

They're literally like head to head. The next team, so if you're in Britain, this probably won't make much sense, but because they're franchises, generally they can geographically move around the country and you don't have like Sheffield United and it just stays in Sheffield. In America, you can have Sheffield United move to Bournemouth, for example. So the Golden State Warriors who were very big in the kind of 2010, to 2020 era, that kind of period. So this is Steph Curry, who's like the big coming-to-retiring kind of age. That was their dominant period, and they won several titles. But they used to be in Philadelphia as an old team, because that was when— I think it was Wilt Chamberlain, who's one of the greatest players in history. That was back in, I don't know, the '60s. So probably Golden State. Then you come to the modern era, And it's MJ and the, the double 3-peat. So, uh, '91 to '93, retired, uh, for a season, came back, didn't do well, then does another second 3-peat. That was late '90s. And then the noughties. So this is basically, you got Philly in the '60s, you've got then Jordan in the '90s, the Spurs in the noughties, which would be Tim Duncan, David Robinson, Tony Parker, Manu Ginobili. The basketball players will know that was a standout period. So yeah, that's probably—

You have never done nearly as well on any other quiz that I've given you. You smashed the top 5 with a good explainer. I think you need a new side podcast where I just ask you questions and get impressed.

Well, look, the other big story here, and not to detract too much, is that their rival LA Lakers have just signed LeBron James's son in this past week. So Bronny is now part of the Lakers. And, and let me give you— let me flip this. So he's just— he's being handpicked out of— in the NBA draft from college. So how many points per game do you think Bronny averaged in the last season?

35. It's either absolutely loads or not many. Either there's nepotism here or he's just an absolute you know, very, very high. I'm gonna say 35. I'm gonna go high.

Okay. So 35 would put you as the top scorer in the NBA right now. So college levels, a little bit more competitive games. So generally they score a bit lower.

Okay.

But Brony scored 4 points a game.

Ah, so he is a nepo baby extraordinaire.

He only actually played a handful of games cuz he had a cardiac arrest in training. At the beginning of the season, and yet he managed to squeeze in at the back end of the NBA draft as pick number 55.

Oh my word.

And the Lakers have gone further. They've also picked JJ Redick, who's a former player who's never coached before in his life, but has a very big podcast in America. He is now the Lakers coach, and he does a podcast show with LeBron James. And now I point this out because strategically, I've read a stat that Bronny has already sold more jerseys than LeBron did and any other new rookie player has, even though he is by far and away subpar to the rest of the other players in the draft. So yeah, it's really interesting.

It's quite remarkable. And obviously you understand the commercial necessity of getting a David Beckham at LA Galaxy or Messi or whatever, because they've already proved themselves and they are the legend. Now getting the legend's kid and still selling more basketball shirts, jerseys than any others. Absolutely remarkable.

Yeah. So part of the deal is you keep LeBron. So for the franchise, from a revenue perspective, you team them up first time, father and son, same team. And then also the social media following between Brony and JJ Redick. To bring in now to the marketing mix of the Lakers means that their team is not going to be the best, but they're probably going to make more money than they did last year.

That is remarkable. And look, you know, just to bring us back to the, to the Boston Celtics, who I think are a little bit more of a sober East Coast version of the, of the, of the gung-ho LA Lakers, this could not come at a better time. So this is going to be So Forbes puts their valuation at $4.7 billion, and Sportico recently said that the Celtics were worth $5.1 billion. Now this is a masterclass in timing, right? You've got the NBA champions. It's not a bad thing to go on the front of a pitch deck. You've also got the media rights deal that is being negotiated at the moment. It's looking like it's going to go through. $76 $1.1 billion NBA media rights deal across over 11 years, but it's 3 times bigger than the current deal. So if you are thinking, all right, how do I stir up a little bit of excitement about a stellar elite blue-chip sports franchise? Well, they've just won the title and they're about to triple their media revenue. And just to take a very quick step back, the reason why it's triple the current deal $76 billion. It's because you've got the streamers that are adding that competitive tension, right? You've got ESPN competing against Comcast. Obviously ESPN's owned by Disney, but competing against Amazon, Apple in the mix as well. So you've just got these extra checkbooks that are driving up the cost of these media rights. And obviously that's trickling down quite quickly to the valuation of the likes of Boston Celtics.

I'd be interested to hear what the fans of the Celtics have to say about that.

Well, I do like the fact that the owners are selling in part because of estate planning and family planning. So look, if you're part of the ownership group's family, you might be getting a little bit of a trust fund coming along quite soon. Look out for that.

All right then. So anything else to close for the episode?

Yeah, I just wanted to do a very quick good week for, bad week for private equity. So private equity, look, it's been a good few months from a deal flow perspective. It's obviously still the asset class du jour as we speak about it. And last week the headline came out that private equity had $30 billion week in terms of acquisitions and transactions. So there were some massive acquisitions by the likes of TPG buying Aeron, the German real estate software business from Advent, another private equity firm for $4 billion. They also bought a business services firm over in Asia for $1.5 billion. CVC bought the infrastructure contractor M Group from PAI, another private equity firm. And they bought a pet food company for $1.6 billion. Brookfield completed its major buyout of Neon, which we spoke about a few weeks ago. EQT have done a major buyout of a company, gaming company called Keyword Studios. These are really, really big deals and obviously it lines the coffers of the M&A bankers as well, who are going to be advisors on these deals. But it shows that the market is relatively buoyant and deals are happening. Which is always good. If you are a private equity firm and you want to sell, well, if you can sell to another private equity firm, you realize that liquidity event and you can distribute back to your limited partners, to your investors. But it wasn't all good. Bad week for private equity. I had to bring in the election at some point and the Labour win. Now, if you are a senior private equity man, you know, private equity banker investor, and you are based in the UK, you probably didn't want Labour to get in. Firstly, because you might well send your kids to private school and you're about to get a nice big VAT bill passed through to you. But secondly, because they are pledging to change the rules on the tax status of what's called carried interest. Which is basically the upside from making money off a fund, the 20 from the 2 and 20 model. At the moment it's treated as capital gains, which is subject to a flat 28% tax. They, the Labour Party, want to move to reclassify carried interest to become income tax. Most private equity managers will definitely hit the top rate. So it's moving carried interest from a 28% tax rate to a 45% tax rate, which is actually prompting lots of private equity firms to go, hey, should we move to Milan? Should we move to Paris? This isn't good for us.

Surely there's a tax-efficient accounting wizardry way of being able to go through the tax legal system of somewhere else, i.e., like big tech going to Ireland. And then just operate still in London?

Yes. I think the difficulty is that it's not, it's not tax on the company, it's tax on the individual. So the individual would have to become a non-dom, but then the non-dom loophole has been closed as well. So look, again, we don't cry for any private equity managers, but let's see what happens. Let's see, let's see whether Labour actually implements this carried interest change. And let's see whether this actually affects the private equity seen in the UK.

And, and just to close, um, back on that scorecard, you were mentioning all of the deals and, and that the fact that that's all the, the PE side, there's obviously multiple banks on all of these deals in the— and kind of compounds. I was just looking, Goldman Sachs has now done 205 deals in M&A and they've done over $500 billion in value.

It's as we said at the front end of this year, I'm going to look back at my trends for the year. We knew that this was going to happen and it's starting to happen in quite a big way. So I expect this trend to continue into Q3 and Q4.

All right. Thank you very much, Steven. Thanks everyone for listening. Any questions or comments at all, remember you can drop it on our Spotify channel on the podcast. There's an option to do that. If you don't already subscribe and follow, then please do. 2 episodes a week, one at the end of the week on markets and this one at the start to get you going for your week ahead. So thanks very much for listening, and I'll see you next time.

Thanks, Ant.