October 2, 2025 • 49 mins
In this episode of the Market Maker podcast, we dive into the largest leveraged buyout in history - Electronic Arts going private in a $55 billion all-cash deal led by Saudi Arabia’s PIF, Silver Lake, and Jared Kushner’s Affinity Partners. What does this blockbuster transaction say about the future of gaming, geopolitics, and private capital?
We also unpack Jefferies’ record-breaking Q3 performance as dealmaking makes a comeback. Is this a lead indicator for bulge bracket banks like Goldman Sachs and J.P. Morgan?
Finally, we look at why London has dropped out of the top 20 global IPO markets for the first time in decades. With capital increasingly flowing to the US, what can the UK do to reclaim its financial edge?
From LBO mechanics and corporate strategy misfires to the intersection of AI, finance, and global power plays, this is an episode packed with insight for anyone tracking markets, banking, and business strategy.
(00:00) Intro & Themes in Focus
(02:25) US Gov Shutdown & Market Impact
(09:26) Coca-Cola's Costa Coffee Misstep
(14:02) Biggest Leverage Buyout Ever
(19:33) Saudi's Gaming Investment Strategy
(27:16) EA Deal Breakdown
(31:44) Strategic Themes in EA Deal
(34:49) Jeffries' Record & Insights
(39:14) London's IPO Market Decline
(44:24) Fixing London's Financial Scene
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hello and welcome back to the Market Maker podcast and three
main talking points. This time round we've got JP
Morgan and Goldman Sachs have landed the biggest leverage buy
out in history with a $55 billion deal for Electronic
Arts. This is a deal about structure,
strategy, soft power. It's got it all.
(00:21):
It's it's a Netflix series in initself.
Having done some research on this, the second story is about
Jeffrey's, the investor banking boutique.
They posted record revenues withdeal making staging a bit of a
comeback. What does it mean though for
other bulge bracket investment banks?
They're used to report the big names like your JPS and GSS and
(00:42):
so forth in about two weeks time.
So what signals are we getting about the health of the industry
there? And then finally, London has
dropped out of the world's top 20 IPO markets.
It's now ranking 23 behind Mexico and Singapore.
So what is going on? Can London reclaim it's former
(01:04):
glory or look to, you know, get you involved and see what you
think as well? But before we begin, a couple of
things. I did do a bit of a call to to
action last episode to rate the show.
And on Spotify, we went from 820to 847 ratings in our pursuit to
get to 1000. So looking at that run rate, I
(01:26):
reckon we'll hit our year end target about mid November, which
is well ahead of forecast. So the share price should be
going up at this point. 27 extraratings.
It's hard to get excited about that.
No, but honestly. Come on.
Come on. Listeners exactly if you, you
(01:46):
know, if you are a regular listener, not I know not
everyone maybe has rated to showit really helps to, you know,
juice up the the Spotify algo and get this out to as many
people as possible. So it'd be much appreciated.
But two quick news flashes that we've had before we dive into
those 3 topics #1 the US government has shut down for the
(02:07):
first time in nearly seven years.
So I know that if they're new tomarkets, you might be thinking,
wow, you know, the press, certainly mainstream media makes
a big deal out of this. You would have seen markets
haven't really reacted because we have been here many times
before. But just to give you the the
headline news story, the Republicans proposed a short
(02:28):
term continuing resolution, theycall it, to essentially keep
funding levels at its current level.
Again, they've hit that Max cap,which is to keep fiscal
discipline, and they've hit thatlimit.
The Democrats, though, blocked it, demanding healthcare
subsidies. That's normally the lever that
they pull. And they want the reversal of $1
trillion in Medicaid cuts now. Yeah, I know you've got some
(02:52):
stats on this pier. So I guess bit of context here.
Shutting down the government. What's the actual implied impact
that that has from a from a costperspective?
Well, I mean, from a cost perspective.
Well, that's a good question. You tell me.
I mean, the last, I think the last time you went to seven
(03:14):
years ago, right? Obviously.
Well, not obviously maybe you don't remember, but that was
obviously Donald Trump's term #1So we've got a common theme here
with Trump. But basically the shutdown could
cost and it's quite a mind blowing number.
This $400 million per day in lost output sounds a bit
(03:36):
sensationalist to me. But what is the actual mechanics
of this though? Because I know for people
following markets, the economic calendar of events has just been
reshaped and there's actually first Friday of the month, of
which we're now rolled into October.
You would normally expect what is traditionally the largest
(03:57):
economic data release, the Labour report.
But I'm assuming then that that what doesn't come out because
the people at the Bureau of Labour Statistics are not at
work. How does this all wash out?
I mean, that's it, right? So people, the government
employees aren't at work becausethey're not getting paid.
I guess this is that point aboutthe cost.
That's like the cost in lost output.
(04:18):
What's the impact of GDPI mean, last time the government was
shut down for over a month and it cost $11 billion or or it
didn't cost that. That's not the bill they have to
pay. It's 11 billion less of
consumption, if you like, because, well, these employees
aren't earning a paycheck anymore.
So naturally they're spending drops, right?
So but 11 billion, I know it sounds like a lot, but if you've
(04:39):
got an economy that's the size of 30 odd trillion, I can't even
remember what we're up to now with the US, but it's 30 odd
trillion, right? So in percentage terms it's
absolutely negligible. But you know, it's a good figure
for the media to band around. The big issue for me here is
right, Well, obviously some of these government jobs are really
(05:02):
important from an economic measurement point of view
because we have the Bureau of Labour Statistics whose job it
is Now you could argue they haven't been doing a
particularly good job given the quality of the data we've had
coming through of late. But you know, we're not going to
get non fund payrolls data should have been tomorrow so
that we lose the key number one,you know, top of the list labor
(05:26):
market measurement each month that's gone, we won't get it.
The CPI inflation data comes midmonth.
If it's still, if the governmentshut down in two weeks time,
which it almost certainly will be, we're not going to sort this
out that quickly. Then we ain't getting an
inflation number. And then the Fed have a meeting.
The next meeting's at the end ofOctober if this shutdown lasts
(05:47):
as long as the last one. And by the way, that was a
really long shutdown. So I don't know if we're going
to get a whole month again like last time.
But if we did, you could see theFed going into that meeting
pretty blind. So we're left with what's called
private sector economic data andwe had an ADP employment report,
which is a privately run kind ofmeasurement on job creation and
(06:11):
that was issued on Wednesday. And that came in really low.
In fact, not only low, it came in negative.
So we had 32,000 -, 32,000 jobs,right.
So that indicates a a continuingtrend, which is a deterioration
of the labor market. So if that's all the data point
the Fed are going to get come their meeting in whatever 4
(06:33):
weeks time, it's they're going to be a little bit blind.
So I don't know how this impactson rate cut expectations, but
for me that's the most importantthing when it comes to how
markets might behave. What's worse, the Fed being
blind or market participants being blind?
Because if the Fed's blind, surely it just shackles their
hands. They can't actually do anything.
They just leave, let's say, policy where it is.
(06:55):
But for traders, it's, well, youhave absolutely, you know, a
market. I'm talking like the intraday
short term reaction function. Yeah, well, then that's going to
be wild because there's nothing to anchor against and the Fed
can't communicate and use forward guidance to narrow that
because they don't have their data to speak.
(07:15):
I it's, it's, it's potentially dangerous.
I mean, if you say the Fed, they're going to sit on their
hands and do nothing. They're not going to cut because
they don't have the data. That's dangerous.
What happens if then fine, the government reopens and we get
payrolls figures, I don't know, in November and the thing's just
fallen off a Cliff again, then you've lost six weeks of kind of
interest rate cutting action to try and kind of stimulate, you
(07:41):
know, an opposing force against that dropping labor market.
So in my mind, well, I don't know, you've got to extrapolate,
right? And the extrapolation is that
the trend's down South. Also Trump.
Trump is not incentivized eitherto do Powell any favours.
If anything he can make Powell look even worse here by just
(08:03):
delaying it. And then Powell is the
probability of him making a successful decision with policy
is going to go down because the lack of the quality of
information he's going into his model so to speak, and therefore
all the more ammo it gives to Trump.
So one thing I would say is on the ADP side, ADP does
(08:23):
periodically recalibrate their figures based on what they call
an expansive series from the theBLS.
And So what can happen and it's something that's always
important when you see I think in this payrolls U.S. companies
unexpectedly dropped in September and large part of that
(08:43):
is being blamed on issues with the methodology behind the data
analysis. So again, I think you're right.
If you look at the chart, it is gone.
It's been going down really all year.
I think there was 1 little bump we saw in March, but generally
from Q early Q4 of last year, it's been trending downwards.
So yeah, I'd agree, clear. Trend having said everything
(09:05):
there, let's just draw a line because S&P new all time highs.
So, you know, you know, equity traders don't care clearly at
this point in time. So that's an important point to
make here. OK, cool.
Well, and the other one I just really quickly wanted to cover
(09:28):
just because not only is it something that probably has
broad appeal because of a lot ofpeople in UK will be consuming
their products, but also becausea lot of people are in M&A
interviews and so forth. And that's Coca-Cola weighing a
£2 billion sale of Costa Coffee.So I'll just go over those
numbers again. They're weighing a 2 billion #
sale. Five years ago they bought it
(09:50):
for just short of four billionth.
Yeah, I was going to say that sounds cheap.
So basically they're they're they're getting, they're
disposing of it and they've losthalf of the value they initially
paid for it. And this was all part of Coke's
initial strategy to diversify beyond fizzy drinks.
Now couples, couple of bits on the strategy side where I think
(10:12):
they've fallen here. But First off, well, who's
interested in buying Costa? And this is where you start to
bring in then interesting different types of players in
industry. So here you've got Bain Capitals
in particular. There's Special Situations unit,
which I'll go on to quickly surmise what that is, but
(10:33):
they're backers of gales. So you might, you know, might
get a cheeky gales if you can afford like a 10 LB croissant or
something like that if you're feeling fairly cakey or Pizza
Express. And TDR Capital and Lizard is
actually advising on this deal and it's 2 billion.
So pretty decent fees, probably going to come on the back of
(10:53):
this. But I thought it was a good case
study very simply and a few interesting parts on corporate
strategy. So one of the things is you've
had fairly sticky inflation, rising labor costs, post
pandemic, pressure on consumer spending.
So obviously this investment that they've made has gone
really pear shaped, strong competition.
Starbucks, Costa is actually thesecond largest coffee chain in
(11:16):
the world. Starbucks, obviously the
dominant player, but then you'vegot prepped.
You've also got a wave of boutique coffee shops, which is
particularly popular with a younger demographic as well, who
are very much part of that consumer spending habit
comparative to older demographics.
And then interesting, common I saw from an analyst was Coca
Cola's underestimation of how capital intensive and
(11:39):
operationally demanding a cafe business is when your
traditional business is con is in concentrate and bottling
models. So yeah.
And then you throw in COVID, it magnifies these weaknesses,
store closures, rising rents, shifts of consumer patterns of
their behavior to at home consumption rather than on the
(11:59):
High Street. And so, yeah, it's really
interesting kind of a lot of things coming together for why
that didn't pan out for Coca-Cola, but also how private
equity is also sitting on the sidelines.
They've been particularly activein consumer retail assets
despite inflation potential challenges on the horizon.
(12:21):
So special situation funds, these are those ones that go in
sell out the S the SAS of the PEworld and their job is turning
around these complex underperforming organizations.
And one that's so operationally intensive, like Costa is
certainly within that domain. And this is where these these
particular Bain has a hit squad on that side of things.
(12:44):
So yeah, timing is everything. You know, strategy can misfire.
Just a really interesting one I thought with with Costa and
Coke. Absolutely.
And I guess slim margins in these types of businesses.
And if you then get COVID and aninflation crisis, you know,
there ain't much room for for for kind of swallowing any
(13:06):
increased costing, right. And so I think that's obviously
what's happened. But Costa, whoever goes into
Costa, I mean, what's what's? Your if you had to go to one of
the big ones then say Nero, Starbucks, Costa.
I can tell you Costa would be the last one that I go into.
(13:27):
I can't stand it. Yeah, I mean, maybe Starbucks, I
guess. But you know, I'm, like you
said, the young demographic. I like the boutique boutique
ones. I'll leave the listeners
guessing your age, but on that, on that note, let's move on.
And let's talk about the main, the main story we're going to
(13:47):
chat about in this episode, which is that Electronic Arts
going private for $55 billion, which would mark the largest LBO
ever. It's a quite, a quite a
historical week, at least for now.
So yeah, what? What's the headlines on this
deal? Yeah, well, mega, mega deal, LBO
leverage, buy out the biggest one in the history of mankind.
(14:12):
So this is, you know, ElectronicArts, so the the the kind of
computer game maker of some absolute classic, you know, the
FIFA, I'm sure lots of people listening to this avid FIFA
players, although I didn't realise they'd rebranded it.
I'm not sure why. Yeah, you can't call it FIFA.
EA Sports FC doesn't quite roll off the tongue as well, but
(14:35):
obviously that's a massive, massive sort of asset in their
in their kind of back pocket. But then other stuff like Madden
NFL, battlefield, there's a new kind of series of that coming
out and then stuff like The Sims, you know, so look, this
obviously these guys have been around for for years.
And actually I remember here, I'm going to show my age.
You just said, guess my age. Well, I'll, I'll, I'll, I'll age
(14:58):
myself here. Tiger Woods golf EA Sports early
naughties was an absolute game changer of a computer game.
I I the amount of hours I wastedof my life on that thing.
Tiger Woods yeah. Anyway, look, this company has
(15:18):
been IPO D and has been on the stock market for a few years and
it just hasn't got on very well-being in the public
markets. OK, We'll come on to a few
points around which ties into one of our conversations from
last week, actually just about Trump's idea of reducing the
frequency of quarterly reporting.
But look, this is a company thatsince they went public just
(15:41):
haven't really they've lost their mojo a little bit.
And I think what's happened is this idea of quarterly reporting
and having to kind of explain your strategy to shareholders
and have to be on these kind of quarterly conference calls and
always explaining yourself. I think what's happened is it's
kind of dampened innovation a little bit.
(16:01):
And so from a share price point of view, they've been kind of
knocking on the door of 150 bucks for really since about
2017 and periodically going up towards that level and just kind
of falling back and just chopping around in a range below
the $150.00 handle. And this is just a signal to
say, well, and, and so right, that's happening.
(16:23):
OK. Then you get outside investors
who, who are trying to eye up deals.
You mentioned earlier that private equity firms, they've
got a huge amount of cash on thesidelines, as people say, a lot
of firepower. It just means they're just
desperate to find deals. And these big, big firms who
have billions and billions on the sidelines, they want to find
(16:43):
huge, massive deals, right? They want to be writing singular
massive checks for really big deals, and they don't come much
bigger than this. So actually this deal, even
though the headline is that it'sPIF, so it's the Saudi sovereign
wealth fund who's putting up most of the money here.
I think 36 billion of the 55. So it's a 55 billion all cash
(17:04):
buyout, 36 billion. Now that is coming from PIF, but
actually this deal got fostered between the other two partners
in this. So it's Silver Lake, which is a
very, you know, best in class sort of tech, you know, fast
growth tech P fund out of the West Coast of America, you know,
(17:26):
hugely respected. And then another partner called
Affinity partners. OK, so you've got Silver Lake
and affinity partners. The thing about Affinity
partners, they they don't do tech at all.
It's actually Jared Kushner's fund.
That's Donald Trump's son-in-law.
He's married to Ivanka Trump andhe set up this fund after Donald
(17:46):
Trump ended his first term. Now who was the key backer?
So he did a capital raise to raise capital for his P firm.
Who was the biggest contributor PIF?
It was MBS in this over in Saudiwho had, Kushner had had formed
quite a pally personal relationship with MBS because
(18:07):
Trump was doing a lot of work onMiddle East peace deals and arms
deals with the Saudis and stuff in his first term, right?
And Kushner was like leading that.
And so his besties with MBS, right?
So basically Kushner went to Silver Lake 1st and said this,
this EA Sports thing. I mean, look, they're not
getting on very well as a publicmarket, a publicly listed
(18:30):
company. Look, there's a, there's an
interesting play here. What do you think?
And Silverlake kind of run the numbers and they're like, all
right, this could be good, but we need, we need a really big
partner. So Kushner got on the plane, fly
out to see his bestie, MBS and said, come on, let's go.
And, and MBS was like, all right, I'm in.
And so the, the, the conversation started and I think
(18:54):
they tabled a bid in September, the 1st bid that didn't get
publicized. Electronic Arts were very quiet,
didn't say anything about it. But they had a bid in September,
they turned it down. So then they came back with a
second bid, 55 billion, which values them at what is it
$210.00 per share. I was talking about the $150.00
(19:16):
kind of range. Well, this has smashed them up
through and I think this is a 25% premium over and above the
share price trading on the stockmarket just before this deal was
announced. Yeah.
Actually one of the things here,you kind of framing it there as
going to Saudi Arabia with an investment opportunity.
(19:38):
But just taking a step back and looking at the public investment
fund piff of Saudi Arabia and who are they, What's their
overarching strategy fundamentally?
And then it starts to also make a lot of sense.
And it's kind of this trifecta of the finance meets politics
meets gaming and tech all comingtogether.
(19:59):
And so in terms of actual size, you know, you mentioned it
earlier, sovereign wealth fund. So it's going to be on the big
side. So it's just short of a
trillion, essentially. It's nearing 925 billion at the
moment. It's one of the things here
obviously that Saudi Arabia doing just for context, that
(20:19):
long term economic transformation plan is division
20-30. This is to reduce dependence on
oil revenues. So you know, lots of talks about
entertainment, tourism, renewable energy, talking to a
few people in the office, they're like, it's aiming to
become the Dubai. And we'll, we'll go into some of
the reasons why they might want to head in that direction.
(20:41):
Because beyond financial returns, Piff views gaming and
entertainment investments as tools of, of soft power,
cultural influence, youth engagement.
And a stat, A stat I wasn't aware of, is that 63% of Saudi
Arabia's population is under 30.Yeah, it's powerful
demographics, that. And then also I was just
(21:04):
interested to know, OK, so what's their pattern?
So whenever I see these investments, it's like, OK,
trying to work out the strategy.Well, what's the precedence of
the behaviour that they've had? And in the gaming industry, I
was quite surprised. So Electronic Arts, they already
held 9.9% stake before the status take private.
You might, you know, you're if you've got kids, certainly or
(21:28):
nephews Pokémon Go. So Scopely they acquired for 4.9
billion 2023. Nintendo Piff has actually built
its stake to around 8%. That's the company's largest
outside shareholder, which is quite incredible.
The cultural differences there between Nintendo's home and and
(21:49):
Saudi. And this one, one that I thought
was quite interesting was anyonewho's a Grand Theft Auto junkie
will know the type of game that that is.
So I was quite surprised to see the Saudi Arabia's wealth fund,
in fact, is very much invested and owns 3 1/2% in Take Two
Interactive, which gives them exposure to Rockstar Games,
(22:12):
who's the house developer of GTA.
So yeah, go figure. But there's also, you know,
outside of gaming, obviously thebiggest strategy we've talked
about this over the the last twoyears, probably a lot Newcastle
United fans out there in the British football, they have
acquired an 80% stake in that team in 2021.
(22:33):
You've got them bankrolling livegolf, striking that deal to
merge operations with PGA Tour. There's Formula One, there's
Combat sports, WWEUFC, you name it, Saudi are all in on this,
this play. And what what I thought was
quite interesting was looking atall this coming together.
So there is the diversification play that's fundamentally I
(22:55):
guess the cornerstone of it. But what I thought was quite
interesting doing some research on this is that the global video
game industry is valued at nearly 190 billion with a
worldwide audience of 3.69 billion players.
That's equivalent of 60% of all Internet users and.
(23:17):
That's insane. What a mark.
That's half the population. Yeah, that's the plan, but.
This is why you know you. You find that surprising because
you're old, Pierce, So they're fair.
Yeah. Yeah.
So then there is that other point about the majority of
Saudis populations under 32 thirds identify themselves
(23:37):
actually as gamers. So EA provides direct access to
that audience domestically, globally as well.
And so this intersection of tech, sports, entertainment,
you're trying to foster the optics then around building a
modern, diverse economy. And then there's things that
some other points I thought werequite interesting.
(23:59):
One was the EA deal reflects notonly a financial investment, but
also for Saudi Arabia, a strategy to develop domestic
talent and capacity in gaming. So by acquiring EA, Saudi Arabia
gains access to one of the industry's deepest talent pools.
So, you know, as much as they have a lot of funding in their
education system domestically, you can also start to be a hub
(24:22):
to attract talent internationally from that.
And then then obviously intellectual information gets
transferred and and so forth. So longer play.
And then another one I thought was interesting finally was
about influenced by the kind of backdoor and was thinking about
the multiple layers of this. And one of the things here was
about Saudi Arabia having a key say in not only where games are
(24:45):
made, but where hardware like consoles and accessories are
too. Such power, then what does that
mean? It could result in countries and
companies who previously refusedto engage being faced with a
tough decision, whether they need to change their stance now
because they have to because of their involvement in the
ecosystem being so powerful and one of these major players in
(25:06):
the gaming space. So yeah, I just thought it's
it's it's good for Saudi. It's obviously good for the the
Trump family. Yeah.
And I look, I would say also like in I'd, I'd say like over
the last decade, the PIF fund, Ijust sit like from an outsider's
(25:27):
point of view, it's kind of justspraying money all over the
place. But actually as time has gone
on, actually it's less spraying it randomly and you're getting
more of a kind of kind of a directional sort of view of
where that, you know, multi decade diversification plan is
heading. And I think I think they they're
(25:47):
they've been tagged, I think in a way with almost like the dumb
money, you know, where, you know, if anybody needs a big
check, right, let's go to the Saudis because they've got all
the money and you know, they'll say yes.
But I think actually here teaming up with Silver Lake
particularly and Kushner, and obviously there's the Trump
connection there. I think this is also a clever
(26:08):
play from a kind of reputationalpoint of view as well, because,
you know, if you're doing a dealin partnership with Silver Lake,
I mean, that's their their top, top, top, right.
Yeah. So, well, let's look at the kind
of deal structure a little bit because PE private equity firms,
they love that, you know, that that kind of stable annual
reoccurring, you know, subscription revenue you get off
(26:30):
quality, quality content. This is perfect kind of
underpinning for for a kind of PE deal, right?
Because obviously with these PE deals, there's debt involved.
The leveraged buy out of course is the is the PE playbook.
And so whilst this is a 55 billion all cash buy out, all
(26:50):
cash just means that there's no,there's no equity, right.
So that means the shareholders of Electronic Arts all of their
shares will be bought for cash. There's no kind of part cash and
OK, here's a bit of equity in a different company.
This is an all cash deal, but this doesn't mean that there's
$55 billion worth of $100 bills on the table and take it away.
(27:14):
So then you structure this now with leveraged buyouts.
What's really interesting about this deal, yes, it's the biggest
one ever, but it's not actually that levered it beat by the way
it's taken out the previous record was a 32 billion.
So it so it smashed the previousrecord, by the way, 32 billion
(27:34):
TXU. Most people listening to this
will have never heard of that company, right?
Texas utilities basically, but they got taken private in 2007
and it was it was the great casestudy for one of the worst deals
ever done. And actually it called the top
of the stock market. So when anybody hit like anybody
(27:56):
old enough hears about, Oh my God, a new massive
record-breaking leveraged buyout.
First response is, oh God, this is the top then, but this is a
bit different TXU. So that 32 billion, right, they
had, I wrote it down. Oh, sorry, it was a 45 billion
deal. Apologies, but they have 37
billion of debt. The, the financing structure 37
(28:19):
billion of debt and then just 8 billion of cash right So that's
an 82% levered deal. The thing is with these PE
deals, who who owns the debt? Who who's got to pay the
interest on the debt? Who's got to pay back this debt?
Well, it's the company that's getting taken private, right?
(28:39):
So Electronic Arts will own and have to service the debt that's
involved with this deal, right? But look, that TXU one, massive
1182%. Then we had the financial
crisis, Norway tits up. They couldn't afford the debt
and it all blew up, right? They couldn't afford the
interest payments. This one's different.
So out of the 55 billion cash, it's 20 billion of debt.
(29:04):
Now here's an interesting story,because what happened again,
the, the people involved in thisdeal, Kushner and Silver Lake
basically said because, because it's the Saudis that are
providing most of the cash part.So it's it's Silver Lake and and
affinity partners that are mostly debt, right?
So they just said, look, we needto find someone who can give us
(29:25):
a lot of debt here. We'd rather do this efficiently.
We don't want many, many, many multiple people involved in
raising this money. We need one check.
Who is there on this planet thatwe can go to knock on the door
and say, will you write us a check for 20 billion, please?
And there aren't many. And basically is Jamie Dimon.
(29:46):
And apparently they went to Jamie Dimon and said, look, this
is what we're doing. And apparently JP Morgan spent
three days, that's it. They spent three days analyzing
this deal. And then Dimon said, here you
go. Here's your 20 billion of debt
finance and. Surely there's some upside here
for Jamie Dimon from a regulation point of view,
(30:08):
license point of view. He's got a few things I saw in
the pipeline about a retail investment platform to rival
Hargreaves Lansdowne and the things like that, and obviously
displays within the favouritism of the administration.
Surely a. 100% also I would say the fact that look so 20 billion
on a 55 billion deal, right. So that's actually a 36%
(30:31):
levered. So what's the risk here to JP
Morgan? Well, the risk isn't huge for
two reasons. Well, look, you've got PIF as
one of the big backers, and actually they'll have the
majority stake in this company, right?
They've got $900 billion. So look, they've got some money
(30:52):
to kind of cover off some of this stuff.
If if, if that debt interest payment thing goes badly.
The other thing I mentioned and you're reoccurring subscription
payments of absolute a star quality content or they throw
off about, you know, EA Sports. So I sorry, Electronic Arts
throw off about 9 billion of cash per year.
(31:13):
Now the financing costs to the company, so it's a 20 billion
deal, right? But they'll, it's likely going
to cost them 1 billion per year to finance that debt, right?
So they're making six one. Look, it's affordable.
The maths really works here. And you've got a backstop in the
Saudis anyway. So I think from JP Morgan's
(31:33):
point of view, you know, writinga big cheque like this makes a
lot of sense. No, not to mention the fees as
well advising on the deal in itself.
So yeah, just summarising then some of the the themes here,
because there's there's several that make it actually probably
one of the star deals of the year in its entirety #1 it's the
(31:55):
size 55 billion that take. Private is the largest leveraged
buyer in history, clearly surpassing the last one at 32.
Second bulge bracket bank power,if you like.
Who else to advise on a deal of this magnitude but Goldman
advising EA? JP Morgan not only advised the
consortium as a group but also structured to financing.
(32:17):
Like you said. That is the single biggest bank
debt commitment in LBO history at 20 billion.
The trade-offs in privatisation going private gives EA freedom
from quarterly earnings pressureto innovate.
Keyword there I think particularly in that type of
industry that they operate in. And then gaming as a core growth
engine, that market size, it's atrue genuine market size like
(32:41):
190 billion and 3.6 billion global players and above average
growth rates. So it's a good growth story
there for potential further upside.
Then there's the Saudi strategy overall really playing to the
the strength of its Vision 20-30idea of reducing dependence on
(33:02):
fossil fuels and it's role in the global cultural hub to
improve its positioning for foreign investments and things
like that to facilitate that change.
And then, you know, putting together then that political
assets part of the deal, regulatory approval.
I mean, a lot of a lot of eyebrows would be raised.
(33:23):
Jared Kushner and Trump's son-in-law and so forth.
But you bring in PIF, you bring in Silver Lake in particular,
who, like you said, it's a, you know, they're a superstar name.
That's certainly going to smoothover a few potential hurdles.
And then you've got JP involved as well with Jamie Dimon.
So yeah, it seems pretty watertight this case.
There's one more strategic theme.
(33:45):
Look, silver, silver like they're not stupid, right?
You know what's why are they doing this deal?
Well, obviously they want to make money.
There is a really interesting AIplay here.
It used to be that you needed a whole army of human being,
computer graphics designers to come up with these phenomenal
games, right? Well, AI is obviously coming in
(34:09):
and making that whole process way, way, way, way more
efficient. So there's probably a really
interesting, what we describe asa margin expansion play here.
So that is a cost reduction through the further adoption of
AI reducing costs and therefore obviously therefore your profit
margins increase. So you you're almost like that
(34:32):
that additional 1 billion of debt interest payments you've
got to make every year. You could easily make that
through margin expansion, I would say maybe even more so.
Yeah, I'd say that's that's the other really interesting angle
to this deal. OK, cool.
Well, let's, let's move to show 1 and let's talk a little bit
about about investment banks andJeffries in particular because
(34:55):
they report traditionally a couple weeks before the big
bulge bracket banks do. So talking about the likes of JP
Morgan, Goldman Sachs. So I think around the 14th, 15th
of October, Jeffrey's has already come out.
So some of the headlines here, they posted record Q3 revenue,
2.05 billion, that's up 22% yearover year.
(35:17):
It's their best Q3 ever and the strongest quarter since early
2021. And so if you remember that
would have been the post COVID deal sort of boom.
So yeah, just wanted to get a bit of an idea of the breakdown
of this. I mean it's not just investment
banking. There is obviously a capital
markets division that they also operate an asset management.
(35:37):
So how were some of those other kind of legs within their
business performing? Yeah.
Well, yeah. So on the capital market side,
they were up 6.9%. So solid.
I mean, not the 17% they saw on that investment banking side,
but it's a bigger part of the business.
So that clocked in at 723 million in terms of revenue
(35:58):
versus that investment bank 655 million.
And there they cut their really strong on the equity side.
Also a bit of options, corporatederivatives, electronic trading
and so on. And there you know, the the kind
of revenues there as a function of like market volatility.
And so you know, the more kind of market volatility.
You know, This is why Trump is perfect for capital markets sell
(36:20):
side businesses, right? He says stuff, it moves markets,
which means people are trading and it's that flow that the sell
side markets divisions are monetizing.
So that did really well. It was actually on the asset
management side that was the stellar.
I mean, it's the much smaller piece of the pie.
So it clocked in with revenues at 177 million, but that nearly
(36:41):
tripled, which is quite extraordinary actually.
And that was just through strongfund performance basically
across all of their strategies, it kind of all came together.
So that was that was interesting.
But but yeah, the two biggest parts of their business are the
investment bank revenues in the capital markets.
And, and yeah, 17% growth on theinvestment bank side
(37:02):
particularly was, yeah, really strong.
And it's a lead indicator this that we've been reading about
the fact that there's been more deal flow, you know, finally
IPOs are kind of back and, you know, we've been waiting for
this to happen, you know, reallysince the start of the year and
it's finally beginning. And so this is a really
(37:24):
interesting kind of, you know, fixed measure as to just how
much is going on. I would say on the one hand, so
a lead indicator, we should expect really strong figures
from the big banks when they start reporting in a couple of
weeks. But that said, I think actually
Jeffrey's here, I think it's probably an outperform.
We'll see when we get the figures from the other banks,
but it looks like in a strong market they're outperforming.
(37:48):
So yeah, Jeffrey's shareholders,very happy people.
Yeah, I was looking at the investment bank FT league tables
and at the moment the, the kind of list going off fees in order
would be Goldman's, JPMS City, then Sensorview Partners
actually and then Jeffrey's. But actually although Goldman
(38:12):
sits at the top and JP and by quite a sizable margin, I would
say particularly Goldman's, Goldman's are up 10% changing
fees versus the previous period.JP are actually down 16 might
get a little bump on that EA deal, I'm sure.
But Jeffries are actually up 63%changing fees versus the
(38:33):
previous period last year. So that's a meaningful jump.
And one thing I did see as well within the banking division is
outside pure M&A of which they've been involved in, you
know, lots of different deals. One of the things is there a
book runner on a major IPO like Firefly Aerospace and crypto
exchange bullish. So their ECM equity capitals
(38:56):
market and DCM, their debt side also had really good
performances. In fact, ECM was up just short
21%, DCM was up 36%. So you know actually the M&A
side's probably what was dragging it a little bit,
although those fees probably made-up a larger portion most
likely. One thing you did say, segue
then into our final story was you said IPOs are back.
(39:21):
Not if you're in London, they ain't, no.
It's just tumbleweed blowing on the streets of London.
Dad, the Threadneedle St. through the heart of the city.
Yeah. So, so the headline this week
was Bloomberg had done some analysis essentially and they
they they compiled just IPO activity and it has a global
(39:43):
ranking and London basically hasdropped out of the world's top
20 IPO markets and IPO volumes down 69% year to date.
It's the lowest at over 35 years.
It's quite incredible actually, when you start looking at some
of these stats and also where wehave been.
As context to where we are today, so the final bit on the
(40:06):
the context, maybe you could explain why this is happening,
which is in 20. In 2006, London raised $51
billion in IPOs. This year's total is down 99%
from that peak. That is crazy talk.
(40:28):
So it's basically just completely stopped.
So what is happening? What?
Why is this occurred? There's a few things, but
there's one massive one that Trump's the whole lot.
It's called the United States ofAmerica, baby.
It's the American dream. Basically what's gone on in the
(40:49):
LA and this isn't sure this justhasn't just suddenly happened.
This is a multi decade trend divergent where the US are just
the absolute juggernaut financial market on the planet.
And the the divergences just every year it's just getting
wider and wider and wider. COVID just spiked it out a
(41:13):
little bit more and you've got ascenario where you've got this
super deep capital markets in America where things like, I
don't know, average risk appetite is just a lot higher.
It's just a cultural thing. Therefore valuations tend to be
a lot higher. And so if you're a business here
(41:36):
in the UK and AstraZeneca is a topical one, massive absolute,
one of the top pharmaceuticals on the entire planet, right, and
a really great company with it. They're thinking of spinning out
of the UK and going to list in in New York.
It's just deeper capital marketsin the US bring higher
valuations, more liquidity, you know, better investor appetite.
(41:58):
And so the problem is the UK cannot compete with that.
And obviously we're the closest culturally to the US because
some of the European markets areactually, they're kind of
perking up a bit here. You're getting really
interesting IPO flow coming out of Amsterdam, Stockholm, Zurich,
for example. They're on the up, whereas
(42:18):
London's just not. And I think because culturally
we're so aligned and language and obviously we're so tight
with the USI think we suffer more from that US ACT
performance when it comes to this, this whole story around
raising capital and IP OS. I'm, I'm assuming though, as a
(42:38):
business owner, there are other downsides to, to listing in
America and more preference here, particularly if you're a
domestic company that operates here, for example.
So I guess like with Costa, we spoke about there's like a
Special Situations bane team that see opportunity where
there's pain almost. And so in this scenario where
(43:03):
where you know, it seems like, well, it's a, it's a bad thing
for London, it's bad for the options are being limited then.
So where do these companies needto turn to if they don't want to
list in the States? Right.
Well, private equity and actually this reminds me of a
point I wanted to make back on the EA story.
(43:23):
Why is there so little debt involved in the EAI say so
little? It's $20 billion, but for a
leveraged buyout, a 36% lever deal is actually really low.
So why is it so low? It's because there's so much
cash on the sidelines, right? And so PE firms, these take
(43:44):
private deals, I reckon they're sniffing about.
And if you're a special situation 1, you know, the UK
market is really interesting forcheap pickings to take some of
these businesses back private. That's like a reverse IPO if you
like, because these PE firms reckon they can get them on the
cheap. And who knows, the strategy
(44:05):
could be than to flip it and go public in the US in five years
time. So I wouldn't be surprised if
you see a step up in USPE deal flow, you know take private sort
of strategy here in the UK. OK, so can it be fixed though?
So what can the UK you. You are now the strategic
(44:28):
advisor to the PM. What?
Resigned. Yeah.
What? What?
I want to see your mortgage statements, Piers.
You can. There's stuff you can do, like
it's easier. There's less rules and
regulations in the US for #1 so easing rules, we've got, we've
(44:51):
got rules here in the UK preventing stuff like dual class
shares. And there's less funky stuff
that's possible, right? And that's therefore less
interesting for companies. And so we could do ourselves a
favor and just copy the US playbook in terms of the kind of
rules and regulations. And I know you can say, well,
(45:11):
look, governance is one of our trump cards, right?
Governance is super strong here.But look, you can have
governance, but you can just, you know, chop your nose off to
spite your face here. We need to just ease back off
that and just get some animal spirits back into this sort of
ecosystem and try and just let the kind of capital markets do
(45:33):
their thing. So that's the main thing.
And then yeah, stuff like the FTSE 100.
So there is change, right? They're now allowing listings in
non pound sterling currencies, for example, loosening rules
around executive pay guidance for publicly listed companies.
(45:53):
This kind of stuff. But you know it, we've been
talking about this stuff for years.
The problem is it's politically unpalatable because if the
economy is not in great shape, we've got too much debt and
we're raising taxes, it's not a great look from the government's
(46:14):
point of view. If you're spinning amazing deals
for these really rich founders of businesses to IPO and make it
way easier, it's not a particularly great political
story domestically. And unfortunately that's been
the handbrake on this sort of reform and the every year it
(46:37):
carries on, the worse it gets. We're now not even in the top 20
of cities for IPO volume, not even in the top 20.
Well, look, not to leave it on a, on a downer.
I was just having a quick look on AI asking it the question of,
you know, in our our team in China, there's various parts in
(46:58):
Shanghai, for example, that operate on a special economic
zone where they have kind of a reform where there's a
particular part of the country or the city which is market
orientated. But I guess one of the downsides
here is that we're already a kind of open liberal marketplace
(47:19):
in a sense. So it's not like in China where
it's very cut off. And therefore you're going to
have a much bigger impact by liberalizing the policies around
an economic centre. But nonetheless, perhaps you
could then in London double downa little bit and start to
isolate out things around particular parts like tech,
(47:39):
fintech. I know they've tried this,
haven't they, to try to get in the AI conversation a lot.
I think Trump, you know, he was obviously they were first in
queue and Trump was handing out some of these deals and things,
right. Yeah.
So it'll be, it'll be interesting to see.
But yeah, any suggestions that people have, do let us know.
I mean, the AI is thrown out at me.
(48:00):
Targeted zones in fintech sandboxing, green tech hubs, AI
innovation zones. That's now we're talking.
Why isn't this happening? Well, look, go and speak.
Go and speak to Sakir. I mean sort it out.
We need, we need new, we need a new political sort of era
because what's gone on in recentdecades just not, it's not, it's
(48:24):
not the right direction. All right, well look.
Ideas on a postcard. Let us know.
And yeah, quick shout out to SABTam for again, doing some
awesome notes on the research for this particular episode.
And also shout out to the students that I met this time
last week at Bath University. Always love coming to Bath.
I, I, I feel like whenever I getoff the train at Bath in the UK,
(48:46):
it's like, it's like Disneyland.You're like, is this place real?
That's a nice, that's a nice part of the country, yeah.
Yeah, anyone who hasn't been, I I highly recommend it.
But yeah, thank you everyone forlistening.
Help us in our quest to get to 1000 ratings on on Spotify for
listening on that platform or drop us a comment.
We'd love to interact. But yeah, have a great weekend
and and we'll see you next time.Yep, see you later.
Hello and welcome back to the Market Maker podcast and three
main talking points. This time round we've got JP
Morgan and Goldman Sachs have landed the biggest leverage buy
out in history with a $55 billion deal for Electronic
Arts. This is a deal about structure,
strategy, soft power. It's got it all.
(00:21):
It's it's a Netflix series in initself.
Having done some research on this, the second story is about
Jeffrey's, the investor banking boutique.
They posted record revenues withdeal making staging a bit of a
comeback. What does it mean though for
other bulge bracket investment banks?
They're used to report the big names like your JPS and GSS and
(00:42):
so forth in about two weeks time.
So what signals are we getting about the health of the industry
there? And then finally, London has
dropped out of the world's top 20 IPO markets.
It's now ranking 23 behind Mexico and Singapore.
So what is going on? Can London reclaim it's former
(01:04):
glory or look to, you know, get you involved and see what you
think as well? But before we begin, a couple of
things. I did do a bit of a call to to
action last episode to rate the show.
And on Spotify, we went from 820to 847 ratings in our pursuit to
get to 1000. So looking at that run rate, I
(01:26):
reckon we'll hit our year end target about mid November, which
is well ahead of forecast. So the share price should be
going up at this point. 27 extraratings.
It's hard to get excited about that.
No, but honestly. Come on.
Come on. Listeners exactly if you, you
(01:46):
know, if you are a regular listener, not I know not
everyone maybe has rated to showit really helps to, you know,
juice up the the Spotify algo and get this out to as many
people as possible. So it'd be much appreciated.
But two quick news flashes that we've had before we dive into
those 3 topics #1 the US government has shut down for the
(02:07):
first time in nearly seven years.
So I know that if they're new tomarkets, you might be thinking,
wow, you know, the press, certainly mainstream media makes
a big deal out of this. You would have seen markets
haven't really reacted because we have been here many times
before. But just to give you the the
headline news story, the Republicans proposed a short
(02:28):
term continuing resolution, theycall it, to essentially keep
funding levels at its current level.
Again, they've hit that Max cap,which is to keep fiscal
discipline, and they've hit thatlimit.
The Democrats, though, blocked it, demanding healthcare
subsidies. That's normally the lever that
they pull. And they want the reversal of $1
trillion in Medicaid cuts now. Yeah, I know you've got some
(02:52):
stats on this pier. So I guess bit of context here.
Shutting down the government. What's the actual implied impact
that that has from a from a costperspective?
Well, I mean, from a cost perspective.
Well, that's a good question. You tell me.
I mean, the last, I think the last time you went to seven
(03:14):
years ago, right? Obviously.
Well, not obviously maybe you don't remember, but that was
obviously Donald Trump's term #1So we've got a common theme here
with Trump. But basically the shutdown could
cost and it's quite a mind blowing number.
This $400 million per day in lost output sounds a bit
(03:36):
sensationalist to me. But what is the actual mechanics
of this though? Because I know for people
following markets, the economic calendar of events has just been
reshaped and there's actually first Friday of the month, of
which we're now rolled into October.
You would normally expect what is traditionally the largest
(03:57):
economic data release, the Labour report.
But I'm assuming then that that what doesn't come out because
the people at the Bureau of Labour Statistics are not at
work. How does this all wash out?
I mean, that's it, right? So people, the government
employees aren't at work becausethey're not getting paid.
I guess this is that point aboutthe cost.
That's like the cost in lost output.
(04:18):
What's the impact of GDPI mean, last time the government was
shut down for over a month and it cost $11 billion or or it
didn't cost that. That's not the bill they have to
pay. It's 11 billion less of
consumption, if you like, because, well, these employees
aren't earning a paycheck anymore.
So naturally they're spending drops, right?
So but 11 billion, I know it sounds like a lot, but if you've
(04:39):
got an economy that's the size of 30 odd trillion, I can't even
remember what we're up to now with the US, but it's 30 odd
trillion, right? So in percentage terms it's
absolutely negligible. But you know, it's a good figure
for the media to band around. The big issue for me here is
right, Well, obviously some of these government jobs are really
(05:02):
important from an economic measurement point of view
because we have the Bureau of Labour Statistics whose job it
is Now you could argue they haven't been doing a
particularly good job given the quality of the data we've had
coming through of late. But you know, we're not going to
get non fund payrolls data should have been tomorrow so
that we lose the key number one,you know, top of the list labor
(05:26):
market measurement each month that's gone, we won't get it.
The CPI inflation data comes midmonth.
If it's still, if the governmentshut down in two weeks time,
which it almost certainly will be, we're not going to sort this
out that quickly. Then we ain't getting an
inflation number. And then the Fed have a meeting.
The next meeting's at the end ofOctober if this shutdown lasts
(05:47):
as long as the last one. And by the way, that was a
really long shutdown. So I don't know if we're going
to get a whole month again like last time.
But if we did, you could see theFed going into that meeting
pretty blind. So we're left with what's called
private sector economic data andwe had an ADP employment report,
which is a privately run kind ofmeasurement on job creation and
(06:11):
that was issued on Wednesday. And that came in really low.
In fact, not only low, it came in negative.
So we had 32,000 -, 32,000 jobs,right.
So that indicates a a continuingtrend, which is a deterioration
of the labor market. So if that's all the data point
the Fed are going to get come their meeting in whatever 4
(06:33):
weeks time, it's they're going to be a little bit blind.
So I don't know how this impactson rate cut expectations, but
for me that's the most importantthing when it comes to how
markets might behave. What's worse, the Fed being
blind or market participants being blind?
Because if the Fed's blind, surely it just shackles their
hands. They can't actually do anything.
They just leave, let's say, policy where it is.
(06:55):
But for traders, it's, well, youhave absolutely, you know, a
market. I'm talking like the intraday
short term reaction function. Yeah, well, then that's going to
be wild because there's nothing to anchor against and the Fed
can't communicate and use forward guidance to narrow that
because they don't have their data to speak.
(07:15):
I it's, it's, it's potentially dangerous.
I mean, if you say the Fed, they're going to sit on their
hands and do nothing. They're not going to cut because
they don't have the data. That's dangerous.
What happens if then fine, the government reopens and we get
payrolls figures, I don't know, in November and the thing's just
fallen off a Cliff again, then you've lost six weeks of kind of
interest rate cutting action to try and kind of stimulate, you
(07:41):
know, an opposing force against that dropping labor market.
So in my mind, well, I don't know, you've got to extrapolate,
right? And the extrapolation is that
the trend's down South. Also Trump.
Trump is not incentivized eitherto do Powell any favours.
If anything he can make Powell look even worse here by just
(08:03):
delaying it. And then Powell is the
probability of him making a successful decision with policy
is going to go down because the lack of the quality of
information he's going into his model so to speak, and therefore
all the more ammo it gives to Trump.
So one thing I would say is on the ADP side, ADP does
(08:23):
periodically recalibrate their figures based on what they call
an expansive series from the theBLS.
And So what can happen and it's something that's always
important when you see I think in this payrolls U.S. companies
unexpectedly dropped in September and large part of that
(08:43):
is being blamed on issues with the methodology behind the data
analysis. So again, I think you're right.
If you look at the chart, it is gone.
It's been going down really all year.
I think there was 1 little bump we saw in March, but generally
from Q early Q4 of last year, it's been trending downwards.
So yeah, I'd agree, clear. Trend having said everything
(09:05):
there, let's just draw a line because S&P new all time highs.
So, you know, you know, equity traders don't care clearly at
this point in time. So that's an important point to
make here. OK, cool.
Well, and the other one I just really quickly wanted to cover
(09:28):
just because not only is it something that probably has
broad appeal because of a lot ofpeople in UK will be consuming
their products, but also becausea lot of people are in M&A
interviews and so forth. And that's Coca-Cola weighing a
£2 billion sale of Costa Coffee.So I'll just go over those
numbers again. They're weighing a 2 billion #
sale. Five years ago they bought it
(09:50):
for just short of four billionth.
Yeah, I was going to say that sounds cheap.
So basically they're they're they're getting, they're
disposing of it and they've losthalf of the value they initially
paid for it. And this was all part of Coke's
initial strategy to diversify beyond fizzy drinks.
Now couples, couple of bits on the strategy side where I think
(10:12):
they've fallen here. But First off, well, who's
interested in buying Costa? And this is where you start to
bring in then interesting different types of players in
industry. So here you've got Bain Capitals
in particular. There's Special Situations unit,
which I'll go on to quickly surmise what that is, but
(10:33):
they're backers of gales. So you might, you know, might
get a cheeky gales if you can afford like a 10 LB croissant or
something like that if you're feeling fairly cakey or Pizza
Express. And TDR Capital and Lizard is
actually advising on this deal and it's 2 billion.
So pretty decent fees, probably going to come on the back of
(10:53):
this. But I thought it was a good case
study very simply and a few interesting parts on corporate
strategy. So one of the things is you've
had fairly sticky inflation, rising labor costs, post
pandemic, pressure on consumer spending.
So obviously this investment that they've made has gone
really pear shaped, strong competition.
Starbucks, Costa is actually thesecond largest coffee chain in
(11:16):
the world. Starbucks, obviously the
dominant player, but then you'vegot prepped.
You've also got a wave of boutique coffee shops, which is
particularly popular with a younger demographic as well, who
are very much part of that consumer spending habit
comparative to older demographics.
And then interesting, common I saw from an analyst was Coca
Cola's underestimation of how capital intensive and
(11:39):
operationally demanding a cafe business is when your
traditional business is con is in concentrate and bottling
models. So yeah.
And then you throw in COVID, it magnifies these weaknesses,
store closures, rising rents, shifts of consumer patterns of
their behavior to at home consumption rather than on the
(11:59):
High Street. And so, yeah, it's really
interesting kind of a lot of things coming together for why
that didn't pan out for Coca-Cola, but also how private
equity is also sitting on the sidelines.
They've been particularly activein consumer retail assets
despite inflation potential challenges on the horizon.
(12:21):
So special situation funds, these are those ones that go in
sell out the S the SAS of the PEworld and their job is turning
around these complex underperforming organizations.
And one that's so operationally intensive, like Costa is
certainly within that domain. And this is where these these
particular Bain has a hit squad on that side of things.
(12:44):
So yeah, timing is everything. You know, strategy can misfire.
Just a really interesting one I thought with with Costa and
Coke. Absolutely.
And I guess slim margins in these types of businesses.
And if you then get COVID and aninflation crisis, you know,
there ain't much room for for for kind of swallowing any
(13:06):
increased costing, right. And so I think that's obviously
what's happened. But Costa, whoever goes into
Costa, I mean, what's what's? Your if you had to go to one of
the big ones then say Nero, Starbucks, Costa.
I can tell you Costa would be the last one that I go into.
(13:27):
I can't stand it. Yeah, I mean, maybe Starbucks, I
guess. But you know, I'm, like you
said, the young demographic. I like the boutique boutique
ones. I'll leave the listeners
guessing your age, but on that, on that note, let's move on.
And let's talk about the main, the main story we're going to
(13:47):
chat about in this episode, which is that Electronic Arts
going private for $55 billion, which would mark the largest LBO
ever. It's a quite, a quite a
historical week, at least for now.
So yeah, what? What's the headlines on this
deal? Yeah, well, mega, mega deal, LBO
leverage, buy out the biggest one in the history of mankind.
(14:12):
So this is, you know, ElectronicArts, so the the the kind of
computer game maker of some absolute classic, you know, the
FIFA, I'm sure lots of people listening to this avid FIFA
players, although I didn't realise they'd rebranded it.
I'm not sure why. Yeah, you can't call it FIFA.
EA Sports FC doesn't quite roll off the tongue as well, but
(14:35):
obviously that's a massive, massive sort of asset in their
in their kind of back pocket. But then other stuff like Madden
NFL, battlefield, there's a new kind of series of that coming
out and then stuff like The Sims, you know, so look, this
obviously these guys have been around for for years.
And actually I remember here, I'm going to show my age.
You just said, guess my age. Well, I'll, I'll, I'll, I'll age
(14:58):
myself here. Tiger Woods golf EA Sports early
naughties was an absolute game changer of a computer game.
I I the amount of hours I wastedof my life on that thing.
Tiger Woods yeah. Anyway, look, this company has
(15:18):
been IPO D and has been on the stock market for a few years and
it just hasn't got on very well-being in the public
markets. OK, We'll come on to a few
points around which ties into one of our conversations from
last week, actually just about Trump's idea of reducing the
frequency of quarterly reporting.
But look, this is a company thatsince they went public just
(15:41):
haven't really they've lost their mojo a little bit.
And I think what's happened is this idea of quarterly reporting
and having to kind of explain your strategy to shareholders
and have to be on these kind of quarterly conference calls and
always explaining yourself. I think what's happened is it's
kind of dampened innovation a little bit.
(16:01):
And so from a share price point of view, they've been kind of
knocking on the door of 150 bucks for really since about
2017 and periodically going up towards that level and just kind
of falling back and just chopping around in a range below
the $150.00 handle. And this is just a signal to
say, well, and, and so right, that's happening.
(16:23):
OK. Then you get outside investors
who, who are trying to eye up deals.
You mentioned earlier that private equity firms, they've
got a huge amount of cash on thesidelines, as people say, a lot
of firepower. It just means they're just
desperate to find deals. And these big, big firms who
have billions and billions on the sidelines, they want to find
(16:43):
huge, massive deals, right? They want to be writing singular
massive checks for really big deals, and they don't come much
bigger than this. So actually this deal, even
though the headline is that it'sPIF, so it's the Saudi sovereign
wealth fund who's putting up most of the money here.
I think 36 billion of the 55. So it's a 55 billion all cash
(17:04):
buyout, 36 billion. Now that is coming from PIF, but
actually this deal got fostered between the other two partners
in this. So it's Silver Lake, which is a
very, you know, best in class sort of tech, you know, fast
growth tech P fund out of the West Coast of America, you know,
(17:26):
hugely respected. And then another partner called
Affinity partners. OK, so you've got Silver Lake
and affinity partners. The thing about Affinity
partners, they they don't do tech at all.
It's actually Jared Kushner's fund.
That's Donald Trump's son-in-law.
He's married to Ivanka Trump andhe set up this fund after Donald
(17:46):
Trump ended his first term. Now who was the key backer?
So he did a capital raise to raise capital for his P firm.
Who was the biggest contributor PIF?
It was MBS in this over in Saudiwho had, Kushner had had formed
quite a pally personal relationship with MBS because
(18:07):
Trump was doing a lot of work onMiddle East peace deals and arms
deals with the Saudis and stuff in his first term, right?
And Kushner was like leading that.
And so his besties with MBS, right?
So basically Kushner went to Silver Lake 1st and said this,
this EA Sports thing. I mean, look, they're not
getting on very well as a publicmarket, a publicly listed
(18:30):
company. Look, there's a, there's an
interesting play here. What do you think?
And Silverlake kind of run the numbers and they're like, all
right, this could be good, but we need, we need a really big
partner. So Kushner got on the plane, fly
out to see his bestie, MBS and said, come on, let's go.
And, and MBS was like, all right, I'm in.
And so the, the, the conversation started and I think
(18:54):
they tabled a bid in September, the 1st bid that didn't get
publicized. Electronic Arts were very quiet,
didn't say anything about it. But they had a bid in September,
they turned it down. So then they came back with a
second bid, 55 billion, which values them at what is it
$210.00 per share. I was talking about the $150.00
(19:16):
kind of range. Well, this has smashed them up
through and I think this is a 25% premium over and above the
share price trading on the stockmarket just before this deal was
announced. Yeah.
Actually one of the things here,you kind of framing it there as
going to Saudi Arabia with an investment opportunity.
(19:38):
But just taking a step back and looking at the public investment
fund piff of Saudi Arabia and who are they, What's their
overarching strategy fundamentally?
And then it starts to also make a lot of sense.
And it's kind of this trifecta of the finance meets politics
meets gaming and tech all comingtogether.
(19:59):
And so in terms of actual size, you know, you mentioned it
earlier, sovereign wealth fund. So it's going to be on the big
side. So it's just short of a
trillion, essentially. It's nearing 925 billion at the
moment. It's one of the things here
obviously that Saudi Arabia doing just for context, that
(20:19):
long term economic transformation plan is division
20-30. This is to reduce dependence on
oil revenues. So you know, lots of talks about
entertainment, tourism, renewable energy, talking to a
few people in the office, they're like, it's aiming to
become the Dubai. And we'll, we'll go into some of
the reasons why they might want to head in that direction.
(20:41):
Because beyond financial returns, Piff views gaming and
entertainment investments as tools of, of soft power,
cultural influence, youth engagement.
And a stat, A stat I wasn't aware of, is that 63% of Saudi
Arabia's population is under 30.Yeah, it's powerful
demographics, that. And then also I was just
(21:04):
interested to know, OK, so what's their pattern?
So whenever I see these investments, it's like, OK,
trying to work out the strategy.Well, what's the precedence of
the behaviour that they've had? And in the gaming industry, I
was quite surprised. So Electronic Arts, they already
held 9.9% stake before the status take private.
You might, you know, you're if you've got kids, certainly or
(21:28):
nephews Pokémon Go. So Scopely they acquired for 4.9
billion 2023. Nintendo Piff has actually built
its stake to around 8%. That's the company's largest
outside shareholder, which is quite incredible.
The cultural differences there between Nintendo's home and and
(21:49):
Saudi. And this one, one that I thought
was quite interesting was anyonewho's a Grand Theft Auto junkie
will know the type of game that that is.
So I was quite surprised to see the Saudi Arabia's wealth fund,
in fact, is very much invested and owns 3 1/2% in Take Two
Interactive, which gives them exposure to Rockstar Games,
(22:12):
who's the house developer of GTA.
So yeah, go figure. But there's also, you know,
outside of gaming, obviously thebiggest strategy we've talked
about this over the the last twoyears, probably a lot Newcastle
United fans out there in the British football, they have
acquired an 80% stake in that team in 2021.
(22:33):
You've got them bankrolling livegolf, striking that deal to
merge operations with PGA Tour. There's Formula One, there's
Combat sports, WWEUFC, you name it, Saudi are all in on this,
this play. And what what I thought was
quite interesting was looking atall this coming together.
So there is the diversification play that's fundamentally I
(22:55):
guess the cornerstone of it. But what I thought was quite
interesting doing some research on this is that the global video
game industry is valued at nearly 190 billion with a
worldwide audience of 3.69 billion players.
That's equivalent of 60% of all Internet users and.
(23:17):
That's insane. What a mark.
That's half the population. Yeah, that's the plan, but.
This is why you know you. You find that surprising because
you're old, Pierce, So they're fair.
Yeah. Yeah.
So then there is that other point about the majority of
Saudis populations under 32 thirds identify themselves
(23:37):
actually as gamers. So EA provides direct access to
that audience domestically, globally as well.
And so this intersection of tech, sports, entertainment,
you're trying to foster the optics then around building a
modern, diverse economy. And then there's things that
some other points I thought werequite interesting.
(23:59):
One was the EA deal reflects notonly a financial investment, but
also for Saudi Arabia, a strategy to develop domestic
talent and capacity in gaming. So by acquiring EA, Saudi Arabia
gains access to one of the industry's deepest talent pools.
So, you know, as much as they have a lot of funding in their
education system domestically, you can also start to be a hub
(24:22):
to attract talent internationally from that.
And then then obviously intellectual information gets
transferred and and so forth. So longer play.
And then another one I thought was interesting finally was
about influenced by the kind of backdoor and was thinking about
the multiple layers of this. And one of the things here was
about Saudi Arabia having a key say in not only where games are
(24:45):
made, but where hardware like consoles and accessories are
too. Such power, then what does that
mean? It could result in countries and
companies who previously refusedto engage being faced with a
tough decision, whether they need to change their stance now
because they have to because of their involvement in the
ecosystem being so powerful and one of these major players in
(25:06):
the gaming space. So yeah, I just thought it's
it's it's good for Saudi. It's obviously good for the the
Trump family. Yeah.
And I look, I would say also like in I'd, I'd say like over
the last decade, the PIF fund, Ijust sit like from an outsider's
(25:27):
point of view, it's kind of justspraying money all over the
place. But actually as time has gone
on, actually it's less spraying it randomly and you're getting
more of a kind of kind of a directional sort of view of
where that, you know, multi decade diversification plan is
heading. And I think I think they they're
(25:47):
they've been tagged, I think in a way with almost like the dumb
money, you know, where, you know, if anybody needs a big
check, right, let's go to the Saudis because they've got all
the money and you know, they'll say yes.
But I think actually here teaming up with Silver Lake
particularly and Kushner, and obviously there's the Trump
connection there. I think this is also a clever
(26:08):
play from a kind of reputationalpoint of view as well, because,
you know, if you're doing a dealin partnership with Silver Lake,
I mean, that's their their top, top, top, right.
Yeah. So, well, let's look at the kind
of deal structure a little bit because PE private equity firms,
they love that, you know, that that kind of stable annual
reoccurring, you know, subscription revenue you get off
(26:30):
quality, quality content. This is perfect kind of
underpinning for for a kind of PE deal, right?
Because obviously with these PE deals, there's debt involved.
The leveraged buy out of course is the is the PE playbook.
And so whilst this is a 55 billion all cash buy out, all
(26:50):
cash just means that there's no,there's no equity, right.
So that means the shareholders of Electronic Arts all of their
shares will be bought for cash. There's no kind of part cash and
OK, here's a bit of equity in a different company.
This is an all cash deal, but this doesn't mean that there's
$55 billion worth of $100 bills on the table and take it away.
(27:14):
So then you structure this now with leveraged buyouts.
What's really interesting about this deal, yes, it's the biggest
one ever, but it's not actually that levered it beat by the way
it's taken out the previous record was a 32 billion.
So it so it smashed the previousrecord, by the way, 32 billion
(27:34):
TXU. Most people listening to this
will have never heard of that company, right?
Texas utilities basically, but they got taken private in 2007
and it was it was the great casestudy for one of the worst deals
ever done. And actually it called the top
of the stock market. So when anybody hit like anybody
(27:56):
old enough hears about, Oh my God, a new massive
record-breaking leveraged buyout.
First response is, oh God, this is the top then, but this is a
bit different TXU. So that 32 billion, right, they
had, I wrote it down. Oh, sorry, it was a 45 billion
deal. Apologies, but they have 37
billion of debt. The, the financing structure 37
(28:19):
billion of debt and then just 8 billion of cash right So that's
an 82% levered deal. The thing is with these PE
deals, who who owns the debt? Who who's got to pay the
interest on the debt? Who's got to pay back this debt?
Well, it's the company that's getting taken private, right?
(28:39):
So Electronic Arts will own and have to service the debt that's
involved with this deal, right? But look, that TXU one, massive
1182%. Then we had the financial
crisis, Norway tits up. They couldn't afford the debt
and it all blew up, right? They couldn't afford the
interest payments. This one's different.
So out of the 55 billion cash, it's 20 billion of debt.
(29:04):
Now here's an interesting story,because what happened again,
the, the people involved in thisdeal, Kushner and Silver Lake
basically said because, because it's the Saudis that are
providing most of the cash part.So it's it's Silver Lake and and
affinity partners that are mostly debt, right?
So they just said, look, we needto find someone who can give us
(29:25):
a lot of debt here. We'd rather do this efficiently.
We don't want many, many, many multiple people involved in
raising this money. We need one check.
Who is there on this planet thatwe can go to knock on the door
and say, will you write us a check for 20 billion, please?
And there aren't many. And basically is Jamie Dimon.
(29:46):
And apparently they went to Jamie Dimon and said, look, this
is what we're doing. And apparently JP Morgan spent
three days, that's it. They spent three days analyzing
this deal. And then Dimon said, here you
go. Here's your 20 billion of debt
finance and. Surely there's some upside here
for Jamie Dimon from a regulation point of view,
(30:08):
license point of view. He's got a few things I saw in
the pipeline about a retail investment platform to rival
Hargreaves Lansdowne and the things like that, and obviously
displays within the favouritism of the administration.
Surely a. 100% also I would say the fact that look so 20 billion
on a 55 billion deal, right. So that's actually a 36%
(30:31):
levered. So what's the risk here to JP
Morgan? Well, the risk isn't huge for
two reasons. Well, look, you've got PIF as
one of the big backers, and actually they'll have the
majority stake in this company, right?
They've got $900 billion. So look, they've got some money
(30:52):
to kind of cover off some of this stuff.
If if, if that debt interest payment thing goes badly.
The other thing I mentioned and you're reoccurring subscription
payments of absolute a star quality content or they throw
off about, you know, EA Sports. So I sorry, Electronic Arts
throw off about 9 billion of cash per year.
(31:13):
Now the financing costs to the company, so it's a 20 billion
deal, right? But they'll, it's likely going
to cost them 1 billion per year to finance that debt, right?
So they're making six one. Look, it's affordable.
The maths really works here. And you've got a backstop in the
Saudis anyway. So I think from JP Morgan's
(31:33):
point of view, you know, writinga big cheque like this makes a
lot of sense. No, not to mention the fees as
well advising on the deal in itself.
So yeah, just summarising then some of the the themes here,
because there's there's several that make it actually probably
one of the star deals of the year in its entirety #1 it's the
(31:55):
size 55 billion that take. Private is the largest leveraged
buyer in history, clearly surpassing the last one at 32.
Second bulge bracket bank power,if you like.
Who else to advise on a deal of this magnitude but Goldman
advising EA? JP Morgan not only advised the
consortium as a group but also structured to financing.
(32:17):
Like you said. That is the single biggest bank
debt commitment in LBO history at 20 billion.
The trade-offs in privatisation going private gives EA freedom
from quarterly earnings pressureto innovate.
Keyword there I think particularly in that type of
industry that they operate in. And then gaming as a core growth
engine, that market size, it's atrue genuine market size like
(32:41):
190 billion and 3.6 billion global players and above average
growth rates. So it's a good growth story
there for potential further upside.
Then there's the Saudi strategy overall really playing to the
the strength of its Vision 20-30idea of reducing dependence on
(33:02):
fossil fuels and it's role in the global cultural hub to
improve its positioning for foreign investments and things
like that to facilitate that change.
And then, you know, putting together then that political
assets part of the deal, regulatory approval.
I mean, a lot of a lot of eyebrows would be raised.
(33:23):
Jared Kushner and Trump's son-in-law and so forth.
But you bring in PIF, you bring in Silver Lake in particular,
who, like you said, it's a, you know, they're a superstar name.
That's certainly going to smoothover a few potential hurdles.
And then you've got JP involved as well with Jamie Dimon.
So yeah, it seems pretty watertight this case.
There's one more strategic theme.
(33:45):
Look, silver, silver like they're not stupid, right?
You know what's why are they doing this deal?
Well, obviously they want to make money.
There is a really interesting AIplay here.
It used to be that you needed a whole army of human being,
computer graphics designers to come up with these phenomenal
games, right? Well, AI is obviously coming in
(34:09):
and making that whole process way, way, way, way more
efficient. So there's probably a really
interesting, what we describe asa margin expansion play here.
So that is a cost reduction through the further adoption of
AI reducing costs and therefore obviously therefore your profit
margins increase. So you you're almost like that
(34:32):
that additional 1 billion of debt interest payments you've
got to make every year. You could easily make that
through margin expansion, I would say maybe even more so.
Yeah, I'd say that's that's the other really interesting angle
to this deal. OK, cool.
Well, let's, let's move to show 1 and let's talk a little bit
about about investment banks andJeffries in particular because
(34:55):
they report traditionally a couple weeks before the big
bulge bracket banks do. So talking about the likes of JP
Morgan, Goldman Sachs. So I think around the 14th, 15th
of October, Jeffrey's has already come out.
So some of the headlines here, they posted record Q3 revenue,
2.05 billion, that's up 22% yearover year.
(35:17):
It's their best Q3 ever and the strongest quarter since early
2021. And so if you remember that
would have been the post COVID deal sort of boom.
So yeah, just wanted to get a bit of an idea of the breakdown
of this. I mean it's not just investment
banking. There is obviously a capital
markets division that they also operate an asset management.
(35:37):
So how were some of those other kind of legs within their
business performing? Yeah.
Well, yeah. So on the capital market side,
they were up 6.9%. So solid.
I mean, not the 17% they saw on that investment banking side,
but it's a bigger part of the business.
So that clocked in at 723 million in terms of revenue
(35:58):
versus that investment bank 655 million.
And there they cut their really strong on the equity side.
Also a bit of options, corporatederivatives, electronic trading
and so on. And there you know, the the kind
of revenues there as a function of like market volatility.
And so you know, the more kind of market volatility.
You know, This is why Trump is perfect for capital markets sell
(36:20):
side businesses, right? He says stuff, it moves markets,
which means people are trading and it's that flow that the sell
side markets divisions are monetizing.
So that did really well. It was actually on the asset
management side that was the stellar.
I mean, it's the much smaller piece of the pie.
So it clocked in with revenues at 177 million, but that nearly
(36:41):
tripled, which is quite extraordinary actually.
And that was just through strongfund performance basically
across all of their strategies, it kind of all came together.
So that was that was interesting.
But but yeah, the two biggest parts of their business are the
investment bank revenues in the capital markets.
And, and yeah, 17% growth on theinvestment bank side
(37:02):
particularly was, yeah, really strong.
And it's a lead indicator this that we've been reading about
the fact that there's been more deal flow, you know, finally
IPOs are kind of back and, you know, we've been waiting for
this to happen, you know, reallysince the start of the year and
it's finally beginning. And so this is a really
(37:24):
interesting kind of, you know, fixed measure as to just how
much is going on. I would say on the one hand, so
a lead indicator, we should expect really strong figures
from the big banks when they start reporting in a couple of
weeks. But that said, I think actually
Jeffrey's here, I think it's probably an outperform.
We'll see when we get the figures from the other banks,
but it looks like in a strong market they're outperforming.
(37:48):
So yeah, Jeffrey's shareholders,very happy people.
Yeah, I was looking at the investment bank FT league tables
and at the moment the, the kind of list going off fees in order
would be Goldman's, JPMS City, then Sensorview Partners
actually and then Jeffrey's. But actually although Goldman
(38:12):
sits at the top and JP and by quite a sizable margin, I would
say particularly Goldman's, Goldman's are up 10% changing
fees versus the previous period.JP are actually down 16 might
get a little bump on that EA deal, I'm sure.
But Jeffries are actually up 63%changing fees versus the
(38:33):
previous period last year. So that's a meaningful jump.
And one thing I did see as well within the banking division is
outside pure M&A of which they've been involved in, you
know, lots of different deals. One of the things is there a
book runner on a major IPO like Firefly Aerospace and crypto
exchange bullish. So their ECM equity capitals
(38:56):
market and DCM, their debt side also had really good
performances. In fact, ECM was up just short
21%, DCM was up 36%. So you know actually the M&A
side's probably what was dragging it a little bit,
although those fees probably made-up a larger portion most
likely. One thing you did say, segue
then into our final story was you said IPOs are back.
(39:21):
Not if you're in London, they ain't, no.
It's just tumbleweed blowing on the streets of London.
Dad, the Threadneedle St. through the heart of the city.
Yeah. So, so the headline this week
was Bloomberg had done some analysis essentially and they
they they compiled just IPO activity and it has a global
(39:43):
ranking and London basically hasdropped out of the world's top
20 IPO markets and IPO volumes down 69% year to date.
It's the lowest at over 35 years.
It's quite incredible actually, when you start looking at some
of these stats and also where wehave been.
As context to where we are today, so the final bit on the
(40:06):
the context, maybe you could explain why this is happening,
which is in 20. In 2006, London raised $51
billion in IPOs. This year's total is down 99%
from that peak. That is crazy talk.
(40:28):
So it's basically just completely stopped.
So what is happening? What?
Why is this occurred? There's a few things, but
there's one massive one that Trump's the whole lot.
It's called the United States ofAmerica, baby.
It's the American dream. Basically what's gone on in the
(40:49):
LA and this isn't sure this justhasn't just suddenly happened.
This is a multi decade trend divergent where the US are just
the absolute juggernaut financial market on the planet.
And the the divergences just every year it's just getting
wider and wider and wider. COVID just spiked it out a
(41:13):
little bit more and you've got ascenario where you've got this
super deep capital markets in America where things like, I
don't know, average risk appetite is just a lot higher.
It's just a cultural thing. Therefore valuations tend to be
a lot higher. And so if you're a business here
(41:36):
in the UK and AstraZeneca is a topical one, massive absolute,
one of the top pharmaceuticals on the entire planet, right, and
a really great company with it. They're thinking of spinning out
of the UK and going to list in in New York.
It's just deeper capital marketsin the US bring higher
valuations, more liquidity, you know, better investor appetite.
(41:58):
And so the problem is the UK cannot compete with that.
And obviously we're the closest culturally to the US because
some of the European markets areactually, they're kind of
perking up a bit here. You're getting really
interesting IPO flow coming out of Amsterdam, Stockholm, Zurich,
for example. They're on the up, whereas
(42:18):
London's just not. And I think because culturally
we're so aligned and language and obviously we're so tight
with the USI think we suffer more from that US ACT
performance when it comes to this, this whole story around
raising capital and IP OS. I'm, I'm assuming though, as a
(42:38):
business owner, there are other downsides to, to listing in
America and more preference here, particularly if you're a
domestic company that operates here, for example.
So I guess like with Costa, we spoke about there's like a
Special Situations bane team that see opportunity where
there's pain almost. And so in this scenario where
(43:03):
where you know, it seems like, well, it's a, it's a bad thing
for London, it's bad for the options are being limited then.
So where do these companies needto turn to if they don't want to
list in the States? Right.
Well, private equity and actually this reminds me of a
point I wanted to make back on the EA story.
(43:23):
Why is there so little debt involved in the EAI say so
little? It's $20 billion, but for a
leveraged buyout, a 36% lever deal is actually really low.
So why is it so low? It's because there's so much
cash on the sidelines, right? And so PE firms, these take
(43:44):
private deals, I reckon they're sniffing about.
And if you're a special situation 1, you know, the UK
market is really interesting forcheap pickings to take some of
these businesses back private. That's like a reverse IPO if you
like, because these PE firms reckon they can get them on the
cheap. And who knows, the strategy
(44:05):
could be than to flip it and go public in the US in five years
time. So I wouldn't be surprised if
you see a step up in USPE deal flow, you know take private sort
of strategy here in the UK. OK, so can it be fixed though?
So what can the UK you. You are now the strategic
(44:28):
advisor to the PM. What?
Resigned. Yeah.
What? What?
I want to see your mortgage statements, Piers.
You can. There's stuff you can do, like
it's easier. There's less rules and
regulations in the US for #1 so easing rules, we've got, we've
(44:51):
got rules here in the UK preventing stuff like dual class
shares. And there's less funky stuff
that's possible, right? And that's therefore less
interesting for companies. And so we could do ourselves a
favor and just copy the US playbook in terms of the kind of
rules and regulations. And I know you can say, well,
(45:11):
look, governance is one of our trump cards, right?
Governance is super strong here.But look, you can have
governance, but you can just, you know, chop your nose off to
spite your face here. We need to just ease back off
that and just get some animal spirits back into this sort of
ecosystem and try and just let the kind of capital markets do
(45:33):
their thing. So that's the main thing.
And then yeah, stuff like the FTSE 100.
So there is change, right? They're now allowing listings in
non pound sterling currencies, for example, loosening rules
around executive pay guidance for publicly listed companies.
(45:53):
This kind of stuff. But you know it, we've been
talking about this stuff for years.
The problem is it's politically unpalatable because if the
economy is not in great shape, we've got too much debt and
we're raising taxes, it's not a great look from the government's
(46:14):
point of view. If you're spinning amazing deals
for these really rich founders of businesses to IPO and make it
way easier, it's not a particularly great political
story domestically. And unfortunately that's been
the handbrake on this sort of reform and the every year it
(46:37):
carries on, the worse it gets. We're now not even in the top 20
of cities for IPO volume, not even in the top 20.
Well, look, not to leave it on a, on a downer.
I was just having a quick look on AI asking it the question of,
you know, in our our team in China, there's various parts in
(46:58):
Shanghai, for example, that operate on a special economic
zone where they have kind of a reform where there's a
particular part of the country or the city which is market
orientated. But I guess one of the downsides
here is that we're already a kind of open liberal marketplace
(47:19):
in a sense. So it's not like in China where
it's very cut off. And therefore you're going to
have a much bigger impact by liberalizing the policies around
an economic centre. But nonetheless, perhaps you
could then in London double downa little bit and start to
isolate out things around particular parts like tech,
(47:39):
fintech. I know they've tried this,
haven't they, to try to get in the AI conversation a lot.
I think Trump, you know, he was obviously they were first in
queue and Trump was handing out some of these deals and things,
right. Yeah.
So it'll be, it'll be interesting to see.
But yeah, any suggestions that people have, do let us know.
I mean, the AI is thrown out at me.
(48:00):
Targeted zones in fintech sandboxing, green tech hubs, AI
innovation zones. That's now we're talking.
Why isn't this happening? Well, look, go and speak.
Go and speak to Sakir. I mean sort it out.
We need, we need new, we need a new political sort of era
because what's gone on in recentdecades just not, it's not, it's
(48:24):
not the right direction. All right, well look.
Ideas on a postcard. Let us know.
And yeah, quick shout out to SABTam for again, doing some
awesome notes on the research for this particular episode.
And also shout out to the students that I met this time
last week at Bath University. Always love coming to Bath.
I, I, I feel like whenever I getoff the train at Bath in the UK,
(48:46):
it's like, it's like Disneyland.You're like, is this place real?
That's a nice, that's a nice part of the country, yeah.
Yeah, anyone who hasn't been, I I highly recommend it.
But yeah, thank you everyone forlistening.
Help us in our quest to get to 1000 ratings on on Spotify for
listening on that platform or drop us a comment.
We'd love to interact. But yeah, have a great weekend
and and we'll see you next time.Yep, see you later.
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