Insights on Portfolio Rebalancing in M&A

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A Scientists welcome to the M and A Science Podcast where we learn from the best in M and A to uncover proven techniques for enterprise value creation. If you're interested in learning more about how to optimize your M and A practice or want to get involved with our community of forward thinking M and a practitioners? Visit mascience.com and subscribe to our free weekly newsletter. If you want to keep up with us on the go, head over to LinkedIn and follow M and A Science. I'm your host, Kisan Patel, CEO and Founder of Deal Room and Chief Scientist at M and A Science. Joining me today is Greg Albert, Managing Director, Corporate Strategy, M and A Accenture Accenture is a global management consulting firm that covers strategy through execution and recently I've heard Forbes has named it number one consulting firm in the world traded on NYSE under acn. Today we're going to talk about portfolio rebalancing, the role of activist investors, and how companies can effectively manage their portfolios to maximize shareholder value. Greg, how are you doing today?

I am great. It's a real pleasure to be with you here today and super excited about today's topic.

Thank you. We're live here in Manhattan at one of the nicest corporate offices I've ever been to and your team is here in person live as well. So we got a nice little audience to keep this live and engaged.

This'll be fun. This'll be anything but dry.

I appreciate you making this happen. Can we kick things off with a little intro on yourself?

First of all, thank you again for your time. It's a great pleasure to be with you here today. My name is Greg Albert. As you said, I'm a managing director in Accenture's M&A Strategy practice. I've been working M and A almost my whole career. My undergrad of all things is in Physics from the University of California at Berkeley, which obviously leads itself to a career in M and A. After doing a tour at Oxford University studying philosophy, came back to the Bay Area. I always thought I was going to head into a career in law and then was offered a job at one of the premier venture capital firms in the world. Ended up spending four years working in venture capital, sourcing around 300 to 400 transactions. Earned my MBA part time. Met someone which happens who moved me from beautiful California to Philadelphia where I joined the corporate development team and strategic planning team for a blue chip chemicals company working primarily in long term strategic planning, wargaming activities as well as transactional work. Buy side, sell side, pre deal, post deal. I wanted to try my hand at consulting for a few years so joined one of the Pureplay strategy consulting houses where I spent about five years working on transactional Work primarily. And then I joined Accenture once Accenture strategy was born and I've had the pleasure to be with Accenture for About the last 10 years, always in the M and A space. I have about 500 deals under my belt. Buy side, sell side, pre deal, post deal, joint ventures, venture capital. So I'm a real transactional wonk, if you will, but still based out of Philadelphia with the same girl, happily married with three kids, living in suburban Philadelphia with a minivan.

This is a pretty well rounded background starting from the vc, getting to in house experience at the chemicals company. Why did you stick to consulting? Is it the miles that you keep collecting? Is that what keeps you in? What is it?

From my perspective, while maybe earlier on in my career, prior to kids, the frequent flyer miles and the hotel points was a real benefit. But what I really love about consulting and particularly working with Accenture is that you get to be engaged and involved with multiple different problems for multiple different clients in multiple different industries and no problems are created equal. If you're a naturally creative, problem solving, anchored person who's analytic, nerdy and find everything interesting and you're naturally curious, I think consulting is a good career for you and for me specifically. And why M and A? It's above the fold in the Wall Street Journal type of work. Big giant transactions come along. These are headline grabbing. Whether it's on the Wall Street Journal, the Financial Times, CNBC, or even if my mom hears about a transaction, she'll ask me, are you involved in this? Generally speaking, obviously I'm not gonna be able to say, but you get to make a difference in the work that you do. And I think that working with Accenture, we get to see the entire spectrum of transactions across the entire life cycle. Today we're going to be talking about portfolio rebalancing. So all the way at the initial, even origination of the idea of transactions and buying and selling companies and then seeing them through all the way through to implementation and execution really creates a lot of value down to the income statement, balance sheet and cash flow to our clients.

Greg, we're the same. We're what medical professionals call having adhd.

I don't know if I have adhd, but I definitely am naturally curious about everything.

That's the biggest trait of having adhd. Like overly curious. And that's why we like to do different things all the time.

It's true. Just a funny story, talking about my career on venture capital, my first day and I learned about income statement, balance sheet, cash flow by doing it rather than a classroom. And I was reading, literally Accounting for Dummies at a Barnes and Noble bookstore in Palo Alto, California. As I was learning about this and naturally curious. It's hard for me to stay focused just on that. And next thing you know, I'm navigating through the, like Wikipedia bookshelves at the Barnes and Noble and reading about Ming Dynasty ceramics to geopolitics and philosophy from the 500600 BC. Naturally curious about all these different topics. Hard to put that into an M and A context, but I think that helps us be good strategists. If you're naturally curious, let's talk about portfolio rebalancing.

I don't really know much about this topic. We haven't really covered it. Can you just give me the high level, what it entails? Why is it important?

Sure. What is portfolio rebalancing at its heart? Whether we're talking about private equity clients, who we serve, or we're Talking about Fortune 500 companies or G2000 companies, they're always reconsidering the businesses that they're in, where they play and how to win. The market continues to change. In fact, there's an interesting quote that's been circulating where the world will never move as slow as it is right now. And if you take that mantra into effect, the concept of portfolio rebalancing, of where you're going to be servicing your clients and customers and where you choose not to, where are you advantage to play in certain markets and product areas, and where are you disadvantaged and maybe you're not the advantaged owner of have never been more relevant from a board perspective. So it's really calculating through a lot of today, some of the macroeconomic headwinds that are happening on the heels of COVID certainly rising interest rates, geopolitical tensions, regulatory environment, even the role of democracy around the world. We have in 2024, 4 billion people around the world who are engaged in the democratic process that is fundamentally changing policy for governments and countries around the world, which will translate into boards of directors needing to make very difficult decisions about where to play, what your footprint is around the world from a business perspective. And that's kind of at the essence of what we consider portfolio rebalancing. And we've done a lot of research on the companies that outperform from a public markets perspective. If you look at the S&P 500 over the last 10 years, companies that have done no transactional work, no portfolio rebalance rebalancing, underperform the S&P 500. Companies that do some portfolio rebalancing, let's say just divestitures, outperform the S&P 500 by about 300 basis points. But companies that do acquisitions divestitures, joint ventures who are actively engaged in their portfolio outperform the S&P 500 by 700 basis points. And we can talk industry specifics, as I think that we will. So it's a very relevant topic for boards and it's very relevant today given all of the changes that are occurring around the world.

Portfolio rebalancing, the world is changing. You got market changes. It sounds like a lot of this has driven political changes because that affects regulations, policies, and you got to really rethink your business to play nice with the new rules. When we look at portfolio rebalancing, companies always do acquisitions. That's sort of like the fun part. I work companies and keep growing and make everybody happy. But it sounds like it's more than just the divestitures. It sounds like there's an element where you can say, hey, let's think about what to get rid of and really have a clear alignment around our strategy. You mentioned other things like some of the JVs and partnerships. Do you define that specific to more than just divestitures of portfolio rebalancing? What specific activities would you attach to it?

It's a great question. Just to try to give a very simple answer to it is that as I've been working with boards and C suites for the last 15 years or so, definitely seen a tidal change in the attitude at boards and management teams. I think 10, 15 years ago, the assumption is that every business stays unless proven otherwise. We don't exit markets, we don't exit products, we don't exit business units, we don't exit geographies or anything like that unless proven otherwise. Unless there's a compelling reason otherwise. Or maybe you get an unsolicited offer for a business unit today, it's completely turned on its head. Every business unit needs to clean sheet, prove its value to the overall organization. For a publicly traded company needs to prove its value to the street. And that starts at the board and works its way down to the management team and cascading it to the business unit leadership. That's a title change in the way that boards are thinking about their portfolios. And within Accenture, how we advise our clients is again, not only that clean sheet mentality, but the concept, as I mentioned before, of the advantage to owner. You may have been advantaged in owning companies five, 10 years ago. But the world has changed. The market has changed, customer sentiment has changed, the culture of your organization has changed. The way of working have changed. The operating models of companies have evolved dramatically over the last five years. If you were to run studies on this, it's amazing the pace of change that we see and we get excited. We embrace change at Accenture, but making the decision to actually put an asset up for sale. I think some people get very sad about these events. You're losing employees, you're losing a heritage, maybe you're losing a brand. However, you get real excited because now they are unburdened, if you will. Hence the concept of the advantaged owner. Unburdened by the current organizational structure, maybe the regulatory environment, maybe if you're publicly traded, the private equity markets are wide open. There's lots of advantages to being privately owned versus publicly traded. And we're seeing a lot of that activity, particularly with about 1.2 to $1.5 trillion in dry powder sitting in private equity. Those funds need to go to work, and the LPGP structure is going to require them. And while the hold times are going longer, that is a giant escape route, if you will, or monetization event for a corporation.

I like how you gave that example of just times have changed and that the way companies think about portfolio rebalancing has really evolved. I was curious why that is. Because you see it from different angles too. When a company announces acquisition, all of a sudden there's a lot more questions on like, how are you actually going to integrate this thing? Why does this actually make strategic sense? Part of me wonders if it's just information's too accessible, like everybody can sit in the earnings call and start. Everybody's getting a little more savvy about the questions they're asking. What's driving it. It's almost like the market sentiments now is just getting more comprehensive to start getting very specific about what this company's actually doing versus just numbers look good. Let's move on next quarter.

I guess I can answer it in three different ways. Let's just talk about the concept of activist investors. They've been around for a long time. Actually, the history of activism goes back to the 60s. Probably got a lot of press during the 80s. Obviously, Gordon Gekko helped with that and Wall street, but they've always been around. And a lot of funds, from an investment perspective, from an alternative investment, have been flowing into activist investor funds. They're instigating change on behalf of the shareholders. That's a big macro trend. That we're seeing. And those trends are manifesting in three, as I mentioned, three different ways. Number one is portfolio rebalancing from an activist investor perspective. Like there are businesses that you should no longer be in that you're no longer the advantaged owner of, so you can just get out or changing of management teams and getting seats on boards of directors. Changing management teams. We saw this play out very recently this week with a very famous coffee company instigating change at the C suite. And then number three, I think is we've seen kind of the death of the conglomerate. What some people are calling over the last four to five years, you've seen a lot of 100, 200 year old companies implode and are no longer the size and scale that they were, let's say 10, 15 years ago. So even activists have been challenging the old mantra of a diversified portfolio from a business perspective. Whereas one side goes up, the other side will take care of it and then you'll be balanced. But from a market perspective, the market, stock market investors are rewarding companies that are exceptional at a handful of things versus generalists at a whole bunch of different things. Activists have been probing and prodding along that to accelerate those portfolio rebalancing activities.

So activists, their triggers could be just, hey, this company should rebalance their portfolio management team sucks. We do something about it. Or the broader strategy of this company isn't relevant in today's time.

Exactly.

Yeah. What's the difference between me, an opinionated shareholder and an activist?

Usually an activist has two things that maybe you as an opinionated shareholder doesn't have. Number one is they have a lot of money. They can buy stock minimum requirement. Well, it's not a minimum requirement. So again, even the fund, the trends within activism. So for example, there was a. One of the super major energy companies had an activist investor that didn't even trigger the 5% threshold that required them to disclose. They openly disclosed their ownership and it was like.01%. But they were very vocal and they pulled together a lot of the other existing investors in the company to get behind a particular strategic initiative. This was about sustainability and changing again the portfolio, the balance of the portfolio. And that instigated change. It got them seats on the boards of the board of directors and did change to some extent. We'll see how this plays off over the next 10 to 15 years. The overall strategic trajectory of this particular company. So you don't need a lot of money, but you need enough money to be able to buy enough shares where you can be forced to be listened to by the board of directors as well as other shareholders, let alone the C suite of the organization.

Okay, you got buying power. What was the other?

We have to have a strong investment thesis. In other words, money is great, but if it's not backed up by evidence and it's not backed up by deep research, and then you're not going to be able to get other investors to go along with your thesis. Otherwise you'll just be a guy with an opinion that owns a couple hundred shares.

So we'll go back to the rebalancing case here. We got the activists as a good point. Hey, this is now emerging. You're seeing a lot more activism activity. And I hear it from our own customers. Big concern from them. I think even just investment analysts are just getting more savvier and they got more access to information. So they're digging in deeper and asking those tougher questions more around how the company's thinking through strategy. Take this exercise and we say, hey, as a company we should probably go through an exercise of teach me how to do this. Yeah, let's pretend I got a big company. I always feel like there's a profile of a company that should start thinking about this. Maybe we should start there because I don't think it's going to be a new year startup company. I feel like it's a company that's probably 20 plus years old and billion plus market cap. What do you see as a profile when a company should start thinking about this?

Every company should have, and we've been doing a lot of work and research on this. The mentality of to think like an activist. In other words, you may or may not have an activist that's engaged. But what are them? To your question, to your point, what are the markers of companies that would attract activists? And based on some research that we've done, we come up with three different markers, if you will. Number one is declining market share over a sustained period of time. Number two is that you've saturated an existing market where there's your slice of a pie won't grow and the size of the pie is likely not going to grow. And then number three is I think just systematic changes in the overall industry. So just to give example, there's been a lot of talk about obviously energy transition, the kind of transition from a hydrocarbon based economy to an electron based economy or as they say to de ice the world in the automotive space internal combustion engine being to de ice the world to go from an internal combustion engine to a electric vehicle. But if you think about the electric vehicle and the supply chain of that, we're seeing a lot of activity, not only just about the automotive companies, but the entire supply chain from mining companies. If you think about the trends of consolidation from mining companies around the world, from rare earth materials like ccm, platinum, palladium and cobalt, to nickel, copper and aluminum, all of the main materials that are going to be required to be able to transition an economy from a hydrocarbon to electron. Then that also gets into the concept of Gen AI, which we will talk about. It's hard to ignore that topic today. If you think about those ecosystem, those are disruptive forces that are going to fundamentally change an industry that really hasn't moved in 100 years, the automotive industry. And it's going to be fundamentally going to change our onset now, it hasn't moved at speed. If you look at some of the forecasts that came out, let's say seven to eight years ago about EV adoption, we have not hit any of those forecasts. So the adoption rate has been slower than anticipated.

So I like the exercise of role playing out shareholder activism and having those three areas is do we see a declining market share for the business? Is the market itself shrinking, or is there systematic industry changes happening? If we look at just that whole overall process of portfolio rebalancing, is that like the starting place? Lay that out as a framework for me. Like how would you approach it?

Take a moment to reflect. Like boards of directors are ultimately accountable to shareholders of publicly traded companies in terms of the return on the investment that their shareholders are placing them in the committees of the boards. Like the concept of risk, for example, has completely transitioned from like the audit committee focused on financial risk to systemic, geopolitical, macroeconomic, labor constrained issues. All of the even black swan events, if you think about probability times likelihood, all of these different types of considerations are being put on the plates of boards. And that is leading to conversations like never before at boards of directors that are translating down to management teams of how to be agile and resilient in a world of increased change. But it's easy for me to say that with words in a sentence. It's a lot harder to actually have an organization that is resilient with a capital R, that can bob and weave in accordance to market trends and customer trends. Social media, for example, can move markets on a moment's notice. It's an interesting concept that to be able to build an organization that's resilient takes more than just a couple of words from a consultant speaking on a podcast. It can take years to be able to move an organization, to be resilient, to adapt to the world that's changing in a way that's never been before.

Give me the how to I want to. I'm like now I got to pick a company. If I were to like come in and just try to come in as a advisor and you know, this company hasn't done any kind of portfolio rebalancing. It's time to change. Let's just make up ABC Corp over here that's been around for 50 years that sort of hasn't done any kind of portfolio rebalancing. Where I'm walking in. We got the board meeting because I got a great reputation like some good friend of mine sitting across from does and I'm trying to guide them to think through that exercise. And it sounds like you bringing up like what's the current state of the world is what we've concluded to so far. What are the impacts that are changing business that may prompt it. But is there any like things that you go to, to really strike chords with folks of yeah, we own this business and it really doesn't fit and getting rid of it would actually help us focus on the other things and a different direction in the company. Or is it going a little too direct or is there a step I'm missing?

Boards and shareholders tend to focus on data. So being able to build a really strong hypothesis driven business case, really leveraging kind of the scientific method, if you will be able to prove out your case has been really critical. Another thing, particularly as you get to actually like you're in the board, you're making a pitch of a transaction and everybody votes yes. And there's like a nanosecond of excitement and then it's wait a minute, what did we just sign up to do? And you think about all of the activities doing transactional work, buy side, sell side, pre deal, post deal. To do it exceptionally is extraordinarily intense and really does not have a lot of room for mistakes or errors. They can be costly. And if you think about other high pressure situations, what we don't see a lot of companies do that. We work closely with companies to build out their M and A muscle, M and A maturity is you think about other activities that require exemplar execution, SEAL Team 6, military activities, sports athletes, pilots, surgeons, et cetera, where the room for error is near zero before catastrophic things can happen. They have something that what my tennis coach used to Call the practice to performance ratio. They're practicing 99% of the time and they're performing one. Why don't we do that more with M and A? So we work with our clients to help build out that M and A muscle before an actual transaction is even contemplated. To be able to build out playbooks, which can be very relevant and useful, but really capabilities and practice sessions to be able to run through a variety of different situations in advance of a transaction. As the saying goes, when did Noah build the ark before the rain? So we prepare companies for giant transactions before they're actually implemented and executed. And there's a whole host of different ways to go about doing that, lessons learned that we can talk about and our clients benefit from a great deal.

What are the examples of that? Because I always feel like there's a couple sides of it. Everybody gets eager to do a deal and sort of like, hey, what do I make sure I don't miss in diligence type of stuff like that on the front end. But then there's the stuff that always gets you, especially first time, which is after you close a deal and it's huh, when you thought about like how do we integrate this company and the fact that that's a whole capability to develop in the corporation which we always, people listen to this podcast know like that's a big fail point. And so how do you sort of look at that part of it as well in terms of you have a practice, you got a lot of reps in supporting these companies to overcome some of the learnings.

If you think about the three stages of a transaction, you have pre sign, post, sign post close and those all feel and look very differently to the individuals that are involved, to the companies that are involved. You think about pre deal. First of all, you have a very small group of people that are likely in the know that are read into the transaction, that are involved and that can talk about that are going through the diligence process, the valuation process and we leverage, for example bringing back the concept of Genai is that Accenture, for example, we've announced publicly that we're investing $2 billion in research in order to better support our clients across the Gen AI agenda. One of the main agenda topics in Gen AI actually is M and A. And we're investing heavily and we have a very interesting and unique capability around doing diligence, leveraging Gen AI. We think about the data room and you think about all of the data that's been in that data room and all of the data rooms that came before it and leveraging large language models to do the analysis to find not the needle in the haystack, but find the red flag amongst a whole bunch of green flowers. Genai enables you to get to know faster versus you were saying? Everybody wants to do a deal. We all think ourselves to be logical. None of us have pointy ears. We're not Vulcans. We are humans. We make decisions based on emotion, even in the board. But then ultimately somebody's going to be holding. Once the deal is announced and everybody again back to the boardroom deal is announced, it hits the street. Now you're in planning phase, can't actually execute anything or implement anything because you're planning for the transaction to close. And by the way, we've seen close windows expand dramatically over the last four to five years due to a variety of different reasons. Regulatory, anti competitive government regulations, even go shop provisions have changed. If you think about purchase sale agreements, the variety of different reasons. But how do you leverage that time during the planning phase to close window sign to close. So that execution is a lot. You're a lot more confident in your ability to execute post close. All of the charters are aligned. Everybody knows what the jazz ensemble looks like so that you're actually playing the instruments and not just looking at the sheet music which you can only do during the close window. So a transaction perspective, that's really where I think the rubber meets the road is execution.

So we have those phrases you mentioned, pre sign, the fun part of the deal which you can easily screw up by doing the wrong deal as well. And then you have this real diligence. But I like how you frame it as like planning, not doing stuff, actually planning of how you can combine the companies than that the actual combining the companies itself, anything on the receiving side for the company, they feel like this is kind of the exercise of really making sure you take the right steps and doing the deal cycle well. But then as a company being able to take on all these incoming new people, systems coming in and whole process of combining data, have you seen that pan out? Because I feel like that's always the biggest shocker. And companies will come in and say we're doing 10 deals this year, then all of a sudden two deals in, they have integration bottlenecks galore.

Yeah, bottlenecks are indigestion. And that's really where I mean these are like back to the board is that you have to have a resilient organization that have some confidence and experience in doing transactions before you actually do the Transactions. Using the planning window to your best benefit is critical planning down to the details with contingencies. What's going to happen on day one? For example, what does day one look like for just a very simple question is what changes on day one? Technically you're a publicly traded company. You're buying another publicly traded company and you're buying the whole thing. Besides whatever's legally required, nothing needs to change so that everything that you decide to change, for example you can chose to accelerate certain synergies. Let's call, let's say G and A. Synergies are a little bit of order to cash, procure, to pay, record to report, HR, finance. It's this is really where value can be created with as little risk as possible. One of the reasons why I work at Accenture is that we're able to go from the strategy all the way through the execution implementation phase and not only hit synergy targets, but increase them in a faster period of time and a higher degree of confidence. But then also not only the G and A side but the top line I think like vertical integration, horizontal integration. We're seeing a lot more deal theses focused on cross selling to existing customers than it is just G and A cost out stuff. And that's a lot more planning that's required and that's a lot more lead time in order to measure twice, cut once. Because you're talking about your most fundamental the reason why you're in business. You're talking about customers. And that could be a very scary, exciting, exhilarating, but also a very scary engagement to be able to talk to a customer and at the same time prepare them for a merger. And then on the flip side, the little dirty secret is that your competitors may be taking advantage of this period of potential anxiety from your customers by trying to poach them during the close window. So how do you stay close to your customers to make sure that you don't have any attrition or loss of revenue through the close window in advance of day one?

Go back around because this is really good in terms of doing a deal well and integrating the other side. The divestiture part I feel is probably the scarier part. When we think about rebalancing a portfolio and almost feel companies know that's so difficult because really integrated in it's going to be painful exercise to really bring that out. And we even talked about that because it's little feelings attached to it. Part of the family there got colleagues there in that business. What do you see there in terms of companies are changing their mood on that and just getting more practice. They know they got to do it or is there still hesitancy? How do you see that? Like I said, the strategy kind of points to it, that we should probably do it to actually executing it, getting it done.

I wish it was a snap the fingers and go from decision to execution and get it done. But obviously that's not the case. Number one, there's a learning curve. If you're an organization that has never been through a carve out or divestiture, it is not an acquisition in reverse. I've had many conversations with clients who we were working with them or we're doing a study on what businesses to keep and to sell and we land on a decision to divest a business and the C suite, the CEO, the cfo, the head of Corp Dev is like nope, we've done tons of acquisitions, we're totally cool, we're all set. All this is an acquisition in reverse. False statement. There's no way to learn this than by doing it again and again. Just like acquisitions, building up that muscle memory, building up that capability. And when we work with our clients, all we'll say to them is that you may do a divestiture once every 10 years. We do 10 to 15 divestitures with our clients every year. So we're coming with a been there, done that mindset, Playbooks of course. But then also no two deals are created equal. No businesses are created equal. You can have a business with a hundred different countries. We help a consumer products company divest a business in 118 different countries.

Ouch.

Yeah, very different activity than if you're divesting a business that has one office in one building and has 50 employees. You're talking apples and donuts. So how do you be able to right size your overall from strategy, your governance process, like how you're actually organizing yourself from a separation management office perspective, from a decision making perspective. And then you were mentioning the selling process on one hand, at the right price, most things are for sale. Where is the deal perimeter end and where does it really end? Like what's negotiable in terms of the selling process for a divestiture? Maybe intellectual property is up for grabs, maybe there's opportunities there, maybe geography or geographic footprint, maybe a right to use. There's a whole host of different considerations that'll be very relevant and germane to a particular transaction. The belly buttons matter because ultimately this does hit real individuals, human beings. It can be a very scary event if You've just learned that your business unit is being divested. That hits home. You think about the communications and the change management, the empathy that needs to go into that. These are very scary activities for people. Getting ahead of some of that by preparing back to the no example, preparing for it before is very critical to success.

You got examples of just companies you've worked with through this whole exercise of portfolio rebalancing. And if you don't want to give name names, but just at least getting the gist of how to transform their business. What was the before state, after state?

Sure. I'll give you an example of a high tech client in the semiconductor space where we worked with on a number of different transactions, buy side, sell side, joint ventures, strategic alliances, and over the last eight to nine years, their entire business portfolio of where they play, who they serve and how they serve them has completely evolved. For example, nine years ago, this is a publicly traded company. Nine years ago they focused in two different end markets, really auto and aerospace defense. Those really were the spaces that they had played in. Today they still are very deep in auto. But as we mentioned earlier about the electric vehicle, auto has completely changed. And if you think about all of the different technologies that go into an electric vehicle, we talked a little bit about the minerals, but also battery technology and the material science behind that, that's a whole industry in and of itself that is experiencing not only systematic change and hypergrowth, but just fundamental science problems that materials science and chemistry just haven't caught up yet. But then also the ones and zeros that go into an electric vehic, the zonal architecture that connects all the sensors into a smart vehicle because the internal combustion engine, the engine and the carburetor, all of that stuff is not necessary anymore. And fundamentally this company has transitioned from working in two markets to servicing 5G. The evolution of the overall communications industry, focused not only in aerospace and defense, but even now space. And how that has even changed from an end user perspective as technology continues to evolve. And you get the SpaceXs and all of their competitors around the world, as well as government work, which they've always stayed behind for strategic reasons, but they've entered into a lot more government work. So we've seen that and they've completely transitioned their back 50% of their revenue today is the same as it was seven years ago. That's the pace of change of this particular organization.

Do they sell anything?

They did three different divestitures during this period of time of various scale. One of them was pretty big, was about 25 countries, about 4,000 employees. The other two were smaller. One was, I think, four or five countries. The other one was. Two was mostly intellectual property play. But yeah, there was a lot of divestitures, acquisitions, plus joint ventures and strategic alliances. We're talking about portfolio rebalancing. I think that networks are being critical and strategic alliances and partnerships are going to be more and more critical over the next decade than there was in the prior decade. As industries continue to converge and blur, if you will. And if you see back to regulatory, you think, what will the magnificent seven, if you will look like in ten years? My guess is just a guess. If I knew the answer, I wouldn't be with you here today, by the way, I'd be buying and selling stocks is that they will look and feel very different than they do today for a variety of different reasons. The stock market being a catalyst, activist investors, geopolitical, regulatory, et cetera. But they'll look and feel very different than they do today.

The semiconductor business, what was it like working with the board and CEO?

In this particular case, it was a very diverse board of directors, which we can talk about again, activism and portfolio rebalancing. The board constitution is critical. If you have just a bunch of people with the same backgrounds, the same experience base, you're not going to have the best diversity of opinions and ideas and backgrounds and really insights to make decisions. This board was extraordinarily diverse. So it was very interesting going to speak to the board at this particular company because they had everything from academics, from investment bankers, and obviously there was the secretary and lawyers, but then also ex military. They had somebody from consumer packaged goods background. They had a rocket scientist of all things on their board. A very diverse board. So the conversations, but you never knew what to expect. It was interesting because the dialogue got more and more. On one hand you would see it's almost like, you know, the accordion. Everybody started to diverge of opinion. But then as we walked and talked through the case over multiple board sessions, everybody started to converge into the same example and answer to these questions.

I want to learn how the power of influence works in the board. Is it you sort of get with the CEO and get him aligned and have him be the influence, or is there a look for the key influencer in the board? You're making individual relationships to figure that out. Teach me the real magic.

It's all about the force. It's just using the force to your advantage. And no, the consulting thing.

You build a strong business case. You show up with like a 50 slide deck. And is that the way to do it?

No, it's more than that. Like for three reasons. Number one is yes. I mean that must be grounded in data. Income statement, balance sheet, cash flow with a solid business case running different scenario planning or different. We even talked about the concept of war gaming. Different war gaming or scenario planning around what can happen with a transaction and stress testing the business case. That's kind of table stakes, if you will.

It's the pitch I guess I am trying to get into.

Like it's the story.

I don't see a magically walking in delivering this pitch. And I just feel like there's a little gamification that happens that you kind of got to figure out how the influence works, which could be unique company to company. That's what I'm wondering.

Cultures are very different. I mean like even cultures within companies and cultures within boards are very different. For example, you're working with a hardcore engineering company where everybody has a degree in engineering just within the organization is very different than working with a company that is full of creatives. I'll give you an example. Talk about Clash of Civilizations. Was working with just a marquee brand in the media space. I'm not going to use their name. And they're very creative, world famous creative. Everybody would know who they are. Very creative, lots of tattoos, ear piercings, prototypical creative organizations. They ended up buying a very manufacturing heavy company to be more vertically integrated who are very block and tackle operations, process focused. So even bringing these cultures and way of working together, it was like I can't even think. Like puzzle pieces are not even the right analogy. It took years and it's taking years for them to actually be able to speak the same vocabulary and nomenclature that the concept of cash flow and profit at one of the organizations, even at the CFO level means something very different than it does when you're working in a very low margin, high cash turn churn organization or business like manufacturing. It's just a fascinating case study of really where the rubber meets the road.

Yeah, that's a good point. Like all these companies are really unique in that regard with their cultures and it sounds like the board could have its own culture. I was digging into this influence stuff because I want to learn how to become an activist. Can you teach me how to become an activist?

I don't know if I could teach you how to be an activist, but I can certainly teach you how to prepare to be attacked by an activist and maybe that'll help you be an Activist on its own.

Okay, let's run through that exercise.

Right. So again, how do you think like an activist has been a very powerful mode of a mindset change to an organization? And I don't mean just a sense of fear. That's not what I mean. If you're running the organization from a clean sheet perspective, what would an outside in company view you as? And I'm not just talking about the general market, but I mean like a true activist who was incented to instigate change, they're financially incented to do so. I have some sympathy for them. They work in a capitalist society. They're not breaking any laws, any rules. They're doing what they're doing. Unlike Gordon Gekko who went to jail, they're playing by the rules. But the activists talking about influence, bringing together multiple stakeholders and shareholders to get behind a new idea or concept for an organization that they may have been an investor in for many years and may have longstanding personal relationships for many years, instigating that change, bringing everybody together, building consensus is not a snap your fingers together type of exercise. It's a consistent rolling activity set that happens over a period of time. So if you're looking for a playbook of how to be an activist, unfortunately you're talking to the wrong guy. But if you're looking for how to make sure that your company is battle tested, either a doesn't fit the criteria for an activist that would be maybe in the market for somebody like you. I can help. If you're looking for an organization that is ready and nimble enough to be able to shield off activist interest, we can talk about that. But what the Nobel Prize worthy ideas of how to be the perfect activist investor that I can't help you with.

Anybody knows Carl Icahn? I've reached out to him, I think a few times. Give him on the podcast. Do make the introduction. We'll pick up the how to be an activist. But why don't we click in on the defense side just to get a sense? Because we gave those use cases where shareholder activism come up with just hey, we don't agree with fundamental strategy. We see market share declining these days. Everybody wants to sue everybody for everything whatever reason goes. What is our defense or how would you approach it? I guess it very much depends on what the activism strategy is.

It's a big question. Some famous general, I think it was Eisenhower said plans are useless, but planning is invaluable. In other words, the actual process of thinking through your 5 to 10 year strategic planning and all of the different permutations that can happen to your end markets, your customers, your suppliers, your all of your stakeholders, and thinking those through in advance of any possible activist attack, if you will, so that you have the plan in place to be able to react to that in a forthcoming way. And most of these discussions happen behind closed doors. A lot of them do hit the Wall Street Journal. We've seen that occur over the last couple of years with some Fortune 100 companies in terms of how the activist plays. But most of these discussions happen behind closed doors. One that I can talk a little bit about is a super major resources based company was approached by an activist. They had tried to instigate material disposals of their business, saying, get out of this particular business. This is not your core competency. Focus on this. And then ultimately the CEO came to right before the shareholder proxy vote was about to happen, came to an agreement behind closed doors, shook hands, and ultimately the activist stayed on the board, but took away the proxy that they put forward to the actual shareholders in the organization.

Can you explain the proxy tool?

Not a lawyer. And a lot of this gets into the articles of incorporation, let alone SEC regulations. But it's kind of bypassing the board of directors and the management team and going directly to the shareholders in order to instigate change at the board at the business level because of different opinions around corporate strategy.

And this would ultimately result in changing CEOs, moving board seats, type of stuff.

Sometimes, yeah, proxy battles can be about esg. ESG considerations have been a material, I guess, thorn in a lot of companies size. On the flip side, like a lot of companies have been able to kung fu that thorn into a positive. If you think about focusing on ESG considerations, I think the headlines of ESG have gone down. The E, the S and the G all being very, very different. But from a shareholder perspective, if you focus on the E, the S and the G, the research is very clear that your returns will outpace those that don't. And we'll see. The SEC has been talking about requiring publicly traded companies, at least on the NYSE and the nasdaq, to disclose certain ESG metrics going forward.

Hmm. Hey, I want to have a little fun because, Greg, you got your team here. I'm going to have one of your teammates, Taylor, come in and ask you a really hard question. We got to try to trip you up.

Nice to be here. Great conversation so far. So, as a way of introduction, Taylor Arendt. I'm an M and a strategy manager working closely with you on your team for several years now. I'm curious because you were talking a little bit earlier around how companies can build their M and A playbooks and capabilities. Really that muscle? What are some of the characteristics of our clients that have a really strong M and A muscle? And then conversely, what are some of those clients that potentially don't have that strong of a muscle as they're starting to think about portfolio rebalancing as a way of growth? It's a really great question, Taylor. Thanks for asking. Number one, been there done that is hard to replicate. So the experience of having done acquisitions before of many different shapes and sizes and have been through multiple different scenarios and different fact patterns to be able to make decision making really fast and easy, I think there's no substitute for that. Been there done that. However, it's not. I would say we talked a little bit earlier about practicing and the practice to performance ratio, but practice doesn't make perfect. Perfect practice makes perfect. Companies that spend and have an always on M and A capability, whether they're doing deals or not, whether they're involved in it or not, irrelevant. But if they're going to have an inorganic muscle, is being able to keep that always on capability going to have a programmatic M and A? We overused this term programmatic, but that just really. In fact, I think a lot of the research even characterizes that word very differently. Always having the always on M and a capability by having a dedicated team that is always refreshing their skills, going through diligences, even if they may not be super excited about the diligence, going through the motions and going through the auction process on a target that even if they know there's going to be a no still continuing through that process, you can't escape. Again, not practice, but perfect practice is going to get you to exceptional. Those are some of the characteristics of companies that are exemplary at executing M and A across the life cycle. Makes total sense when you think about flipping it. Of the companies that potentially don't have that muscle or aren't putting it into practice over time and then being caught off guard when potentially that rebalancing opportunity comes. Whether it's potential carve out potential acquisition and then your having to dust off the Playbooks and might not be very easy to do. Yeah, and no two deals are created equal to your point. We talked about differences between acquisitions and divestitures, joint ventures or even a whole different kettle of fish. But even having those Playbooks in place which are useful, the Playbooks, the templates, if you will. We leverage a lot of digital accelerators at Accenture which help companies think through the planning through execution phase. Even the operating model pros and cons and simulating different ways that a company could be operating. Post close of what the integration journey looks like, it's not a one's done like in a hundred days it's over. Small deals can be like that. It can turn into BAU business as usual. But like the integration journey can take a long time and if you think about again the real people we use a tool that's called Org view. What this does it allows you to simulate multiple different organizational designs that'll best support the operating model. That's consistent with the investment thesis. So it does de risk the overall execution by practicing early. Perfect practice early and then executing later. Makes perfect sense. Appreciate your thoughts. Thank you Taylor. Thanks for having me. Conrad Devin, strategy manager in the M and a practice based in New York, worked with Greg on previous deal. Greg, you mentioned portfolio rebalancing. You talked about two aspects of it. One, you have to have cash. Two, you have to have a good investment thesis. Capital allocation is an important part of having a good thesis. How do you think about capital allocation at the top of the M and A process and how does it change throughout the M and A process? Let's just start with the balance sheet and let's just start with assets and liabilities. Fundamentally is that we ought to be able to have the right leverage. If you're a publicly traded company, particularly private equity looks at things a little bit different and we can talk about that. But if you think about capital allocation from an M and A perspective, the good thing about an acquisition is you don't actually have to write a check until the deal is done. On the buy side and on the sell side, you get real excited about an inflated bank account, but only when the deal is completed. So that's why the pre planning process is so critical. Because what you don't want to have is any delays to day one on any side of the transaction. Number one is it opens up a whole bunch of different considerations. It can in terms of the actual deal documents, the purchase sale agreement. Maybe there's been a Mac provision, a material adverse change provision that's been triggered over a period of time. But we want to be able to complete the transaction with as much confidence and speed as possible so that your capital allocations are well known and you know how much money you need to have in the bank. If you're paying cash in order to do that but the other part of the equation obviously is stock. Whilst it may not hit your bank account is certainly going to be an impact in terms of your valuation and how many shares outstanding that you're as you're just printing shares to the market, that's maybe not capital, but in terms of value, you're diluting the ultimate value of the organization by a share perspective. Unless you're pricing the asset correctly and then back to execution where it all lies is actually driving value consistent with the investment thesis. And as you know, Conrad, a lot of the things like where our clients get really excited about is that we'll help them with the investment thesis, pressure test the overall value creation story behind the thesis, but then help them accelerate the value post close and then even increase it at the same time. So from a DCF perspective, discounted cash flow, back to your question on capital. It's a giant value to our clients and really a giant lever for Accenture to be able to best support our clients. I've mentioned sources of cash, how you deploy it, or sources of funds. I should say also deployment of the funds. You mentioned not just being able to execute the deal quickly, but also having the right procedures and tools in place to facilitate the close of the deal. That's something that we've been concerned about as consultants through our pre and post merger planning process. You mentioned some great points around that the duration of the close window is critical. And Jay Neely, our global lead of Accenture M and a strategy practice, Transaction Advisory Practice, recently published a paper that talks very specifically about five things that should be used during an elongated close window. Time's a terrible thing to waste time. For those listening, there's some very specific, if you want to call it playbook or lessons learned from how to best use that planning period.

All right, that was a great job.

Your team's helping me out crowdsourcing ideas. This is great. Thank God we don't have an open phone line here you would be bringing in.

I thank team for helping out. I really appreciate that was a lot of fun. So you know one thing I was thinking about was we talked about portfolio rebalancing and automatically I'm always thinking the context of large public company. But what about private equity owned businesses or is that non existent? Because I feel like mostly private equity just stack revenue, slap a big multiplier on it, pass it on. The next private equity firm.

First of all, let's talk about private equity as an investor class. It's funny, over the last decade, investors in private equity and this is the GP and the LPs both have outperformed the S&P 500 and the Dow. So over the last decade. So we're seeing a lot of money go into these classes. And it's roughly a 7 to 8 trillion dollars investment class right now, but it's expected to grow to about 20 trillion in a very Austin Powers type way. $20 trillion over the next decade. Unbelievable growth in private equity. And why that is is because of the success that private equity has had. They have advantages over publicly traded companies in terms of value creation. Number one is you don't need to worry about disclosures and Sarbanes, Oxley or any of the other kind of considerations that publicly traded companies would need to disclose and deal with. And those are also very expensive to do. And number two is that they are singularly focused and relentless and I appreciate, I love working with private equity clients but singularly focused and relentless on value creation. And it's not an academic term when I'm sitting with a client in private equity, not that it is with my corporate clients, but with private equity it is very serious and playbook. There's an operating manual if you will in terms of value creation. The roll up considerations for today, like you're seeing a lot of private equity funds being formed around the enthesis of there are many fragmented industries that should not be fragmented. So there's a tremendous amount of opportunity for value creation through consolidation. So for example, working with one of the major private equity funds right now and one of their portfolio companies, we helped them through a string of eight acquisitions over 15 months in this very niche software space. And we're watching their EBITDA value continues to grow over time not only because of cost out exercises. We talked already about G and a cost out that is good, but then also again top line growth, cross selling, entering into new markets and then leveraging other portfolio companies that they may own that may be suppliers to another fund. It's a very unique opportunity for value creation that a private equity fund would have, particularly some of the bulge bracket funds, but even the mid market funds, let's call them 10 to 15 billion of assets under management are getting much more mature around not only the extended hold times that we're seeing in private equity because the IPO markets it's been, they really have never recovered since COVID And we'll see. Everybody's predicting the rise of the IPO to come back in either New York or London or around the world. But we haven't seen them come back and With a rising interest rate environment, it makes things even a little bit harder for private equity funds based on their economic model. The hold times are being elongated and they've been taking advantage of that and we've been working with them taking advantage of that by doing more and more value creation initiatives, more and more consolidation from their portfolio companies. And then as you mentioned before, we're seeing a lot of portfolio companies do that consolidation. And then even if they don't go ipo, private equity cared about cash flow. So other private equity funds, you're seeing a lot of PE to PE transactions.

When you look at the private equity portfolio like private equity likes buying carve outs, but you see them actually carving out businesses of their portfolio.

So you mean like they're, they own a business and they're carving out so portfolio rebalancing. The whole concept of that exists for both the publicly traded companies and for private equity funds. For example, I have a private equity client right now where the investment thesis going into a particular transaction is to eventually carve out part of the business that they're buying and spinning it off into its own entity. That's much more difficult to do if you're publicly traded because you have shareholders every quarter to answer to. Whereas private equity have a longer lead time in order for them to be able to monetize the investments that they're making into it. They can also be a lot more risk seeking versus risk avoidance within the private equity world.

Is it fair to say it's like not as frequent? Because I feel like you look at large public companies, the sheer size and nature of them having all these business lines and being very diversified versus the private equity tends to invest as a platform with more of a tighter strategy to begin with. And then size wise this many handfuls of firms are actually buying billion plus dollar deals. It doesn't happen as much.

The trend actually is an increase. And why that is is because of the hold times and because the LPs, the limited partners want their money. One way to monetize and pay back the money without selling the whole thing is by carving out a part of the business, monetizing that and giving it to your limited partners as a part, as a dividend or as a one time payment from a return on investment perspective, and particularly in a who knows what Powell will happen in the Fed interest rates in the future. Again, if I knew that I wouldn't be here with you today. We hope we're in a descending interest rate environment, in which case we may see more and more Activity the way that you're describing it because interest rates, if they have peaked and knock on wood that they have, then we'll see more and more of those types of transactions.

We were talking about war gaming earlier. Let's bring in war gaming into this and let's war game the interest rates. Can you give me an example? Teach me how war gaming works and is that a fair example? Say hey, let's talk through change of interest rates and how that's going to affect our approach to doing deals.

So war gaming as a concept, as the name alludes to, or you can call it scenario planning, or you can just call it strategic planning if you really just want to be vanilla about it. War gaming does have a little bit more of a interesting title to it and companies have been doing this. I think Shell really was the trendsetter in war gaming starting in the 1960s and 1970s. Shell the energy company, but now companies that's back to the board is that you have a whole host of exogenous factors that you need to grapple with of where to play, how to win and how do you think about that in a structured, methodical, kind of programmatic way is through this concept what we call wargaming or scenario planning. And Genai enables us to be able to do this a lot better and faster. Not because of compute, but because we can all start with the same set of facts. With the war gaming, it's all based on probabilistic mathematics. You want to call it Monte Carlo simulations. We can do that too. We can get really nerdy in math if you'd like to around how different companies do this. But it really starts with a simple stated agreement of fact. We need to be able to as a board agree on the facts that are out there. And how do we be able to establish that fact based and then be able to run various scenarios. You're talking about interest rates, geopolitical tensions, macroeconomic regulatory, changing landscapes we've already talked about, but the interest rates are. I just wanted to give a context. But interest rates are critical because we were talking about when Conrad I think was asking this question, we were talking about discounted cash flow. And when you talk about discounted cash flow, you imply a weighted average cost of capital that flows into interest rates. For example, you saw what happened a couple of weeks ago with the yen, what their central bank did and the chain, the wild swings between the dollar and the yen and what happened there because of the carry trade imbalance. If you're a global organization, you're dealing with FX or financial currency risk every day the CFO is worried about this. If you're a multinational company, if you're talking about interest rates, that plays into it because you're worried about what central bank in the UK around the EU obviously in Washington, the Federal Reserve of the US let alone all of Asia is doing. All of these are taken into consideration to the capital question and where to allocate different capital and human resources in the organization. So we run these various scenario planning simulations with companies to help them be best prepared for high impact low likelihood events and be able to have at least business continuity planning or plans on a page to be able to grapple with these unforeseen events or low likelihood events.

Sounds like fun.

It's really cool. And I can tell you like executives lean into these types of conversations. It can be a little nerve wracking because you start throwing crazy things out there like what happens if there's another pandemic and everybody's that'll never. And then they start remembering wasn't that long ago there was this thing called Covid or for those of you remember the great financial crisis. What if banks start failing stress tests? What would happen to the world economy and are businesses fundamentally built resiliently enough to be able to adapt to a changing market that happens that fast?

Century's a pretty big company. I'm just wondering work with a lot of companies and there's always like when and where to use which type of advisor or resource. And I feel like there's like sweet spots to that. I was just curious like where do you fit in? Like we're a little 50 person company and I couldn't see us saying hey we need to go work with Accenture to start War Gaming, our first acquisition. But we work a lot of public companies and it's. You can just tell there's little deals they'll do in house. Especially when they do something significant like 500 million plus they're bringing in some advisors and different firms, a different reputation and different capabilities. Love to hear just your thoughts since you are on the other side or in the house. In terms of where do you see sort of the sweet spot and best fits to work with a firm like yours.

Remember my background before I got into consulting I was in with a blue chip Dow Jones company and corporate development.

That's why I'm expecting to be as unbiased as possible on this. No big commercials here.

One of the most valuable things that we can provide to our clients is that we can Be upfront thinking about corporate strategy. We talk about transaction. Transactions are a means to an end, not an end in to of itself. So it does start with corporate strategy. Portfolio rebalancing is a part of that. We help companies reimagine themselves and transform themselves and think about what that roadmap looks like over the next three to five years and how do you do it at pace with confidence in a compressed low risk way or what we call compressed transformation. What our clients tend to value most is that we can be upfront in the strategy, planning, vision, setting, operating model, design, part and run side by side with you all the way through the implementation and execution of it. From strategy through execution. For example, we're working now with a Fortune 50 consumer products goods company. We've helped them with a variety of different transactions over the last 10 years and they're completely reinventing their overall footprint of where they play in the market and where they want to be over the next five years. They were seeking a single firm that can be able to be with them through the overall over end to end journey versus hiring one firm to do the upfront, another firm to do planning, another firm to do this, another firm they were looking for like the single all hands on ship journey partner to be able to run with them through this journey. And also we ultimately as being publicly traded, we also put some skin in the game with our clients. So we put where our fees are at risk under certain scenarios and that we're completely committed in a very significant way. And you hear the example of the ham and egg sandwich where the chicken was involved but the pig was committed in this example, like Accenture is fully committed to our clients success and we'll do it on a revenue at risk basis.

You got a good reputation. Randy Tinsley at Synapses says hi by the way. Yes, I heard he's got something big cooking so you may want to reach out to him.

Hi Randy, how are you?

I think that's an interesting point around just looking at what the relationship goal is. Is there like a size minimum though that you would say like hey, you know, a company should be at least this big.

Most of our clients are G2000 clients and our private equity clients run the gambit. However, we are very committed to companies that are really seeking to change industries and be trendsetters. So for example, Accenture has its own venture capital division that's called Accenture Ventures and we invest in startup organizations in order for us to be boots on the ground, ear to the road, whatever metaphor you want to use in terms of what's coming over the next three to five years. And we leverage a lot of our investments in these companies to make relationships with other smaller organizations who we do partner with and advise on multiple different facets from strategy through execution.

Awesome. I'm going to keep bugging you for free advice. I was really curious about future trends in M and A, even around portfolio rebalancing. Where are we going?

Yeah, since we're in New York, we got to quote Yogi Berra on this one. He said predicting is very hard, especially about the future. So the future, again, it's hard to tell. But what we're seeing here, the pace of change in terms of customer end markets will never be slower than it is right now. Obviously we talked about some of the other meta trends that there's no slowing down energy transition, ESG considerations. You have Asia, the world tilting in terms of a giant middle class popping up in Asia. What does that mean to companies? Companies are thinking very hard about what does that mean to their inorganic growth agendas. And those will all play out, we think, manifest itself to not only giant industry because there's always gonna be megadeals that we're gonna see happen in the world, particularly in a sinking interest rate environment, but companies completely reinventing themselves from where they are now to the next five to 10 years. And that includes not only portfolio rebalancing, but strategic partnerships. And you're seeing giant organizations within the technology space partner with the electric vehicle manufacturers. Let's say you're seeing giant energy companies partner with electrical grids. You're seeing consumer packaged goods companies partnering with mining organizations. These are trends that are not going to stop. These trends will only accelerate. How they ultimately will play out is the bajillion dollar question. And it depends on every niche industry and every customer and every client that we deal with is a little bit different. But it's from a consulting perspective, when ambiguity has never been higher and the known to unknown ratio has never been lower, it's a great time for to partner with firms like Accenture who have their pulse on the next five to 10 years.

The pace of change is just forever increasing.

That is true.

Getting back on this theme of portfolio management, any advice out there that just stands out to you? For companies starting to think about this.

The time horizon from origination of an idea to a transaction to transaction execution has been artificially inflated. As we work with our clients, we'll perform diligence on multiple deals and we see this across industry and can read the journal and watch cnbc. But like the that that period from origination to execute like that pull the trigger on a deal has gone up. I think over the next 12 to 18 months as some of the again unknown to unknown, known to unknown ratio goes up, I think we're going to see a giant decrease in that time. In other words, when I work with strategic clients like they take a long time, there's a governance process to make decisions. But in order to compete for an acquisition target, you need to move at the pace of your competitors, which may be private equity who can move much faster. Your confidence level is going to go up a lot more, which means the risk will go down a lot more on transaction execution and value creation over the next 12 to 18 months. So I'm hoping that the time from origination to decision also will go down and then just problem solving, good old fashioned corporate problem solving. The trend has definitely been more towards risk on. Risk off is always going to be a consideration, but more towards quicker and faster decision making. I think we're going to see that within M and A. I'm a cockeyed optimist on transactional work in general and more and more transactions due to a lot of the things that we've talked about over the last hour or so. I think we're going to see continued industry convergence, tectonic shifts due to all of the macroeconomic trends that's going to translate and manifest itself into companies reinventing themselves and transforming themselves into new organizations to better compete and win in the ever evolving and changing markets. And from a consulting perspective and an advisory perspective, there's never been a better time to be in consulting. Yes, I'm biased.

You're a little bit. A little bit. But we're both fired up and optimistic about what's to come in our industry. And I do call it industry. Somebody tried to call me out and say M and A itself is not an industry. M and A is like plays an industry. It's like no, there's so many dedicated folks that work in M and A. I am stating right now M and A is an industry. We're all together, M and A science and M and A scientists out there. But before we wrap up, I got to ask you, Greg, 500 plus deals. What's the craziest thing you've seen in M and A?

I guess I should have known this question was coming.

Just don't. I've talked to a bunch of lawyers and they said, listen Kisan, as long as you don't name Names or dates? Totally fine to tell anything else.

Cool. You're giving me legal advice. This is.

No, just as lawyers told me. So I've been advised by lawyers, anonymous lawyers.

I mean, I've. I've been deposed. I've been part of transactions. Craziest transaction I've ever seen. Well, look, so there was a mega deal that happened about eight or nine years ago talking about the Mac provision.

We gotta explain Mac material adverse change change. And this is really funny. We had a cameo on a Netflix show called Partner Track. And that was like the whole premise was around that thing. And then that's where we got a little plug. So if anybody wants to check out season one, show one and learn more about it. So when the main actress, she's like listening to the podcast throughout the show and she's like picking up and she's listening part about Mac claws, but is the scene when she falls asleep listening to the podcast and the camera pans to her phone. It's our logo for three and a half seconds straight. It's awesome. So we have actually a big legal M and A audience. So that's why I was like, well, we might as well explain what it is.

Yeah, yeah. So material adverse change. If something. I'm not a lawyer, I'm not giving legal advice. But if something giant outside the control of most parties happens during the close window, the buyer has the option to exit a deal. Again, there's a lot more that goes into it and I'm not a lawyer, so I'll just leave it at that. But I was involved in a transaction where the Mac clause was triggered. Ultimately it went to court and it was extraordinarily contentious. But this was during the great financial crisis. But ultimately the court system, luckily we live in a. We have three branches of government and the judicial branch is one of them. And why people want to be doing business in the United States, because the rule of law is what controls is that ultimately this went to this third Circuit court in this case. And ultimately the judge said no. The great financial crisis and in totality was an exogenous event, but it is not a catalyst in terms of the Mac provision in this particular transaction. Why does that matter? First of all, it was a megadeal. If everybody can Google this now and probably imply to what deal that this is. But being in the middle, in the middle of that was fascinating. Just because it was hitting the Wall Street Journal and cnbc and I was right in the middle of it. It was pretty cool. But why we were talking about concepts of war gaming? How are these low likelihood high impact events going to be coming around the corner and how do you remain agile and resilient? To be able to grapple with them as a company, let alone during an M and a transaction or event is critical as you think about companies being able to drive shareholder value and reduce risk. So that's one of the craziest that we can tell on video deals that I've been a part of. Over drinks is a different conversation my friend.

It's crazy. We're heading to the bar after this. Let's do it.

All right, deal.

Greg, this has been awesome conversation. Greg's team, Accenture team here. Thanks for joining us. Appreciate the support. Appreciate the awesome office and that view. I can't get over. I got to make a little video to send the friends at home. Those of you still listening, if you made it this far in the podcast, I appreciate you fellow M and A scientists. It means a lot. Reach out to me on LinkedIn. Love to hear from you. Love to hear feedback. Even if you hate the podcast. Just tell me why so I can get better at doing this. Till next time, here's to the deal. Foreign thank you for taking the time to explore the world of M and A with our podcast. We love hearing feedback. Tag us on a LinkedIn post. Add a review on Apple Podcasts. We'd love to hear from you. If you need help standing up an M and A function or optimizing one that you already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email Kisan K I S o n a science.com or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. That's where you can also subscribe to our newsletter. Again, that's mascience.com here's to the deal. Views and opinions expressed on M and A Science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.