June 16, 2025 • 31 mins
From a $33 billion family tie-up at Toyota to Japan’s 400% surge in M&A activity, Anthony and Stephen break down the latest investment banking scorecard and why dealmakers are suddenly flocking East.
They also dig into Disney’s final takeover of Hulu, the $15 billion Meta bet on AI startup Scale, and the fiery rise of Dave’s Hot Chicken, where three friends turned a $900 parking lot pop-up into a billion-dollar brand.
Essential listening for anyone tracking global M&A trends, streaming wars, AI arms races and the unexpected lessons of franchise chicken economics.
(00:00) Intro & Themes in Focus
(02:09) Investment Banking Scorecard Overview
(04:09) Japan's M&A Surge: A Deep Dive
(10:46) Disney's Strategic Acquisition of Hulu
(16:46) Meta's $15 Billion Bet on AI
(23:25) The Rise of Dave's Hot Chicken
****
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hello and welcome back to another episode of the Deal
Room. And we're going to talk about
the investment banking scorecard.
We like to dive into this every now and again by popular demand
to see who the movers and shakers are.
But there is one geographic region that is up over 400% year
on year. Do you know who you're about to
(00:22):
find out? Really interesting stuff.
And also we've had a couple of M&A deals that we want to touch
upon. One, the complex acquisition of
Total Industries by dub www.toyotasohow on earth has
that happened and what is going on there?
Definitely keeping it in the family And then discussing
Disney acquiring the final 33% stake in streamer Hulu Mehta's
(00:46):
$14 billion investment in Scale AI.
And then by popular demand as well.
There was more than one comment actually, Stephen, on this one.
You know, people have got an affinity here for, for chicken
wings because raw capitals investment in Dave's hot chicken
and you've, you've made a note here saying this is a game
changer. So I'm definitely interested to
(01:07):
hear about this one. This is an absolute game
changer. I tell you what.
I went on Dave's Hot Chickens website and I'm not very good
with spine. So I have to say and I kind of
came out in a bit of a a kind ofa spice sweat just looking at
the images of the website. So I don't think they're one for
me, but it's definitely worth hanging on until the end of this
(01:29):
episode because the the origin story of this billion dollar
chicken company is quite remarkable.
I really. I did the same.
I had a quick look and I was like, I mean, look, you have to
any US listeners who need to forgive us because this isn't
within our our region, but I waslike, OK, what signing waivers
(01:51):
because of the level of spice and some people have died or
something. I was like OK, so these are.
Some hot? Only in America.
Yeah, America. So yeah, but perhaps we can
start then with with the scorecard?
Yeah, absolutely. Yeah, we're going to cover
these. We're going to go pretty thick
and fast into these. There's a lot of stories and a
lot to get through, but I reallywanted, yeah, OK, every kind of
(02:11):
6/6 to 8 weeks, we take a look at the investment banking
scorecards and we sometimes do adeep dive, sometimes we don't.
But this one, one number one country stood out.
So I've got in front of me a chart that says year to date
deal value in dollar billions and year on year percentage
change in terms of M&A and Japan414% increase in MNA activity.
(02:40):
And this is something that we really, really need to be aware
of because Japan was not necessarily previously closed
for business from an MNA perspective, but it was deemed
to be a little bit of an outlier, not necessarily even a
hinterland. They just had a different way of
doing things. Very, very complex conglomerate
(03:01):
structures, not a great willingness to entertain
activist invent investors, no real private equity involvement
in it for a number of years. But there's been so much stuff,
so many tailwinds that have led to this 414% increase.
And it is worth noting for any students out there that we live
(03:23):
in a global world, right? And we follow the money and the
money is heading towards the Middle East and the money at the
moment is heading towards Japan.So again, something to be aware
of. But let's look into why the
414%. There are some macroeconomic
factors which I think we've discussed before.
(03:44):
The weak yen meaning that meaning that a dollar
denominated buyer would be able to buy, get more bang for their
buck, quite literally low interest rates.
Obviously, there's been a 30 years of deflation in Japan, so
borrowing is relatively cheap, but not.
But more importantly, more structurally, there has been a
(04:05):
shifting of the corporate landscape.
And I know we talk a lot about deals and we like on this
podcast, we like numbers and we like the big strategy stuff.
But sometimes it's important to look at the legislation and the
impact that legislation has on the nature of a particular
industry. So there was a market, there
(04:25):
were a series of market structure reforms in Japan,
starting with a change to the corporate Governance code
introduced by the government in 2022.
And there are more initiatives, for example, the TSE and the
METI. The TSEI know very exciting
stuff. The TSE announced its action to
(04:46):
implement management that is conscious of capital and stock
price. Now, if you're an American
listener or even a British listener, you would really,
really hope that management is interested in the cost of
capital and in their stock price.
But what's tended to happen in alot of large companies in Japan
(05:08):
is they're still controlled by families or or groups of private
investors. There may be a small free float,
but the their interest in the oscillations of a share price
hasn't hasn't really hit them. So, so this isn't moving Japan
more to a kind of western model and it's opening up a bunch of
(05:31):
interesting stuff and these companies and now in the market,
you know, the game is afoot. And remember Japan has got some
of the best industrial companies, manufacturing
companies. And I'll, I'll pause in a
second, but I've just got a little image in front of me from
AJP Morgan study that says that inbound MNA activity over the
(05:55):
last 14 years has grown compoundannual growth weight rate of
almost 8%. That is significant growth over
a 13 year year period of US acquirers, EMEA acquirers buying
assets in in Japan. So just finally to close this
(06:15):
just conversation then for context, because obviously
people will think, OK, 414% likewhat is the US and Europe?
So just so we're clear, what arethose comparables on a
geographic basis? Yeah, Japan's still small.
It's it's $150 billion of deal value year to date compared to
Europe double at 300 billion, the US 750 billion.
(06:41):
So it's so it's still small, butthe size of the deals are
getting quite interesting, especially if you've got your
M&A advisory hat on. I'm just going to give you a few
of the biggest deals and maybe end on the Toyota deal that you
mentioned at the top of the episode.
So 3.3 billion deal, Bain Capital private equity,
(07:01):
acquisition of Mitsubishi TamabePharma Corporation from the
Mitsubishi Chemical Group. This sounds a little bit like
the splitting up of a conglomerate and a private
equity buyer, right? Toyota and Daimler Truck merged
their Japanese units, 6.4 billion.
Another may be breaking up of that Toyota conglomerate or at
(07:22):
least restructuring. And Nippon Life acquiring
Resolution Life for over $10 billion.
And then another take private, KKR and JIC taking a company
called Top Con private but for 2.3 billion.
But the biggest one that was announced last week is Toyota
(07:43):
acquiring Toyota Industries for $33 billion.
And this is, this is such an interesting deal because again,
in the in, in normal M&A or in Western M&A, you would think
about the acquisition price, youwould think about whether it was
(08:04):
a competitive process, you wouldthink about the acquisition
premium. All of these things would go
into the analysis that you do and the things that we talk
about. But in this case, there was only
really one buyer that could everreally buy Toyota Industries and
that was Toyota because Toyota already owns 39% of Toyota
(08:27):
Industries. And it will happen because the
voting rights are so heavily stacked in the buyer's favorite.
So it's almost akin to buying a subsidiary.
Well, it is akin to buying a subsidiary, except that there
are other, it's a listed company.
So there are public asset managers, public investors that
(08:49):
have invested in Toyota industries separate to Toyota
the the topco. So these investors are going no,
no, like you paid a bargain basement price for Toyota
Industries because there's not going to be this competitive
environment because you're the only buyer in town and we're
going to get screwed over here. I think the premium was a 23%
(09:12):
premium to the pre speculation price.
So it's so interesting to see how these different tie UPS,
conglomerate discounts, unwinding of long criticized
cross shareholding. It's starting to play out slowly
and surely in Japan. Cool.
All right, well, let's move on and talk Disney and Hulu.
(09:36):
Disney and Hulu, well, look, shout out to the summer
analysts. We've got our first summer
analyst cohort this week and forthe next two weeks and we've got
two more cohorts coming up laterthis summer which are still open
if you want to get involved. Link in the show notes folks for
those interested. Link in the show, you basically
(09:59):
have to listen to Anthony at 3:00 PM every single day for
three weeks. So if you want to do that as
part of your summer, then pleasedo.
But it's a lot more than that, obviously.
But anyway, the reason why I saythat is because Disney is one of
our new simulations that is coming exclusively to the summer
analyst program. It's a 24 hour simulation, lots
(10:20):
of interesting stuff, some of the parts analysis, valuation
analysis, some merger modeling as well.
So very, very relevant that thisheadline popped up a few days
ago. And the headline is that Disney
is to pay Comcast $439,000,000 to take full control of Hulu,
(10:42):
ending a lengthy valuation process.
And this is such an interesting story just to get that extra
layer of understanding about different M and A scenarios.
So let me give you a very, very brief background.
Hulu started, I think it was launched in like 2008 and it was
(11:02):
actually a joint venture between21st Century, 21st Century Fox
and NBC Universal, which later was bought by Comcast.
So effectively 21st Century Fox owned 66% and Comcast owned 33%.
In 2019. What did Walt Disney do?
(11:23):
They bought 21st Century Fox in a mega acquisition.
They effectively gained control over Hulu and Hulu which has now
got upwards of 55,000,000 subscribers and released shows
like The Bear which obviously was extremely popular.
It's part of Disney's streaming strategy.
(11:45):
Right, but 33% still owned by Comcast.
There was an agreement in 2019 that that 33% would eventually
get sold by Comcast to Disney, but at a valuation floor of a
valuation of $27.5 billion. So pro rata that for 33 billion
(12:10):
wine back to or actually go forward to 2023.
And these discussions went live.Comcast wanted to shed the rest
of the 33%. Disney wanted to fully
consolidate and realized Hulu asa 100% owned entity.
What Disney did is it paid the $27.5 billion pro rated floor to
(12:34):
say, look, you know, that is theminimum that we're going to pay
for this remaining 33%. Let's engage with a bunch of
valuers, a bunch of arbitrators to try and figure out whether,
you know, as of 2024, now 2025, this thing, Hulu is worth much
(12:55):
more than 27.5 billion. So Disney had its advisors, its
arbitrators. Comcast, sorry, its appraisers,
sorry, Comcast had its appraisers.
Disney was coming out around 27.5 billion.
As you can imagine, Comcast was like, no, I think this thing's
probably worth more like 40 billion, which would give them a
(13:15):
much bigger ticket. RBC Capital was engaged to do
the appraisal, the third party independent appraisal, which
Disney and Comcast said, look, whatever they come up with in
terms of the valuation over and above 27.5 billion, we are going
to be happy with, right? That's it.
(13:35):
So this 430 thirty 8.7 million is the result of the valuation
over and above the 27.5 billion floor, giving the total
enterprise value of Hulu somewhere in the region of 29
billion. But it's just a really, really
interesting case study about howmessy these things can be,
(13:59):
right? You buy a company, it has a non
wholly owned subsidiary. What are you going to do with
it? How much do you value the
remaining percentage? And interestingly enough, the
reason why you have to go through this appraisal process
is because no one else is going to buy that 33%, right?
It's a captive asset to Disney. It's already been integrated
(14:23):
into their financial statements and into their strategy.
So you've got to have a fair market valuation that isn't
determined by a bidding process or a competitive process.
I can't remember all the details, but I seem to remember
Disney having lots of issues, let's say with the succession
(14:44):
planning. And is it, is it Bob Iger?
And he was coming and going and then there was kind of just
foray down into double down intostreaming.
But then kind of Netflix is justsuch a beast.
So just talk to me like what's the streaming landscape and
what's the strategic implications of them now
executing on that remaining state?
Yeah, absolutely. It's a, it's a really good
(15:05):
point. And Bob Iger's come and gone I
think three Times Now he's he's back at the helm.
He's one of those people a little bit like Howard Schultz
at Starbucks. He he just can't, he just can't
let it go. And Disney is an extremely
complex beast. Anyone that does the summer
analyst program with with us in in over the next few weeks will
realize that it's three different divisions.
(15:25):
Entertainment experiences and sports are wildly different,
right? You've got theme parks sitting
alongside Disney Plus, sitting alongside ESPN.
The growth in the business quiteunderstandably is coming through
streaming. And if you've got Disney Plus,
if you've got Hulu and if you'vegot ESPN on demand, you are
(15:49):
starting to create a pretty compelling package.
And I think the way that we needto be thinking about the world
of streaming is what are the twoor three packages that are
absolutely necessary for me to have the best overall viewing
experience. And it might end up that it's
Disney with its Hulu and now andwith its ESPN and its Netflix as
(16:15):
the two big players that continue to grow in this
landscape. I'm not entirely sure, but the
growth of Disney Plus is outstripping everything else in
that business. That's super interesting.
I'm definitely keen to see our analysts prayer output, let's
say from their analysis. But let's let's move to show on
and talk a little bit about something I've seen lots of.
(16:38):
You know, if you're part of the very niche finance memes on
various social platforms, you would have seen quite a lot of
Meta and AI in the last week or so.
So, so what's this deal, Zuckerberg?
It seems we've gone full board into the metaverse pivot, now
AI, and now he's doubling down again.
(17:01):
Yeah. Can I just say, and obviously if
anyone listens to this podcast regularly, you'll know that I'm
not a not a huge fan of Meta. Can I just say the integrating
Llama it's LLM into WhatsApp is one of the most annoying things
in the history of the world. I want my WhatsApp to do what
(17:21):
WhatsApp does, which is just a chat function with my friends as
intuitive as possible. I don't need to get them to
write me a story or to search the web.
I've got other things that can do that.
It annoys me and I know that Meta is trying to become this
everything app, but it's still are really, really frustrating
and not something that I asked for.
It just comes right. Anyway, rounds over.
(17:44):
So this story, Meta plans to invest $15 billion in Scale AI
in a bid to catch up with rivals.
So this is actually a $15 billion purchase of a 49% stake
in this company Scale AI. And you might remember from
previous episodes whether it's, well, there's a lot of different
(18:08):
case examples of the likes of Microsoft and Google.
I think it was Microsoft paying $650 million to hire Mustafa
Suleiman and his top lieutenantsto get them away from the
company that they were working with.
Again, huge antitrust issues. What have it happened to that?
I remember that at the time and that was like, so what's he done
(18:30):
like since then? It's gone quiet.
So, so Inflection, the key members of the Inflection team
have joined Microsoft and it is currently being investigated by
antitrust. Same goes for Google paying 2.7
billion for a similar arrangement with Character AI.
Obviously same goes for the arrangement between Open AI and
Microsoft. It's an acquisition through the
(18:52):
back door in order to avoid regulatory scrutiny.
And this 49 percent, $15 billion, you know, it's not a
control controlling stake, but the CEO of of the company of
Scale AI is joining the new kindof Meta Super Intelligent Labs
(19:15):
as part of that team. So it is an acquisition by any
other means, right? Just to be clear, this Alexander
Wang character, he's what, 28 years old?
Something like that. Yeah, he's 28 years old and
there's, I don't know whether there's kind of sour grapes and
I don't know enough about the industry to understand whether
(19:37):
he's just a very good show person and is very, very good at
kind of pumping a story or whether scale really is this
transformational technology. What scale does, by the way, in
my mind is super, super basic. And again, please correct me on
the chat, on the comments if I'mwrong.
It does the first thing wheneverwhen I'm researching this, first
(19:58):
thing I'm looking at is that onesentence and the one sentence is
scale. AI does basically tagging,
manual tagging for data that goes into large language model.
So for large language models, it's all about the quality and
the structuring and the tagging of huge, huge data sets, right?
(20:19):
And often in order to get it 100% right, the tag needs to be
done by a human. So.
Cancer, you know, read the word cancer in a sentence and think
that that relates to medicine. Something really, really basic,
right? Some basic tagging.
And that's what this company started at.
And obviously it's expanded to fill in other kind of enterprise
(20:40):
elements. But I'm really interested to see
whether this is properly going to move the needle for Meta that
is well and truly behind the 8 ball with regards to the release
of it's LAMA four large languagemodel, which has been roundly
trounced A for being terrible, but B also basically cheating in
(21:07):
the in the kind of independent model, the independent
University of Berkeley study, they cheated and basically said
it was as powerful, more powerful than ChatGPT 4.0,
whatever it might be. But actually that was only under
certain parameters and it wasn'treleasing that version of the
model and that was. You're talking, you're talking
(21:28):
down meta again. I'm going to have to come on,
come on where everyone knows. When you see that chart and they
release like the 4.01 issue of the software, we all know that
that's, you know, they they've played that they've fudged to
books. They're all doing that.
Surely you can't just be meta that's doing this.
No, I don't know. I don't know enough about it.
And please do put a comment in the YouTube if you know more
(21:50):
than me. And again, maybe this is my
inbuilt bias against Meta. If someone is going to control
the AI landscape, I'm not entirely sure I want it to be
Mark Zuckerberg. But anyway, there will be
regulatory scrutiny, by the way,so this might not happen.
One thing as well, I know you'rea big fan of Reddit and your
your base case for that was because of the fact that they're
(22:12):
sitting on this kind of goldmineof unstructured information
almost that would require systematic AI driven labeling
surely? So isn't there?
Isn't that like a use case of where this type of thing would
be? Yeah, it's definitely a use
case. And I think the use case
probably extends most saliently to data sets that are either
(22:34):
proprietary or in some way classified or yeah, yeah, or
restricted in some way, shape orform.
Right. So they've just released with
with their training, they've released a kind of, I can't even
remember what it's called, a military LLM application layer
because they've been through theprocess of structuring and
(22:54):
helping to tag and organize vastterabytes of data that is held
in different levels of classification.
So I think that is a really interesting use case.
Reddit possibly as well. I think there's just something,
there's something lurking in Steam, Steam, Barnett's WhatsApp
messages that you just don't want out.
I think that's the the underlying threat here.
(23:17):
I can tell you there's a lot of things lurking that I wouldn't
want to actually come out. All right, let's move on.
Yeah, let's let's let's talk hotchicken.
Chicken wings. This is this is my favorite
story and thank you for those people that said put it on the
podcast because we're, we speak so often about high finance and
big business and LLMS and GPTS and all this kind of stuff,
(23:40):
which quite frankly is not my area of interest.
Chicken, however, is definitely an area of interest for me.
So the top, the headline is thatRaw capital you might have, you
might remember those guys from the acquisition of Subway, which
we covered a couple of years ago.
Raw Capital has acquired A majority stake in Dave's Hot
(24:00):
Chicken. Now days hot chicken.
This is a brilliant origin story.
I'm just going to give you a little bit of the background.
So at the age of 24, the founder, our man Organician,
sorry for butchering the name, was making $50 a night at a as a
stand up comedian. And then he used just like, no,
(24:21):
I think this could be a little bit of there could be something
here in this kind of chicken space.
He loved Nashville hot chicken so he pulled $900 in savings
with I think his bro with his childhood friends Dave and
Tommy. I assume Dave is the Dave's hot
chicken and opened as a pop up in a Los Angeles parking lot
(24:41):
right? $900 They beg stolen, borrow.
I don't know if they stole but they definitely begged and
borrowed to get the truck and toget the kit and within at the
listen to this. At the end of their second
month, they pay themselves for the first time, each taking home
around $10,000 in cash. Within two months, they had made
(25:03):
10 grand each in that month. That is insane.
That is bonkers. Yeah, and like what?
So I'm just saw some notes here.They were selling Nashville hot
chicken. I'm going to be your super
British here. If you're an American listener,
please write me a short description.
What's Nashville hot chicken as opposed to a different region of
(25:24):
America, please? Yeah, I can't help you with
that. But they started making money
and then in, you know, this is acompany that was a company,
quote UN quote, that was foundedin 2017, in 27 or 8 years ago in
2019, an investor group, which includes now Dave CEO, Dave's
Chicken CEO Bill Phelps. He's a bit of a legend in the
(25:46):
industry. And Samuel L Jackson bought a
stake in the company, which is and they and and in order to
scale and then franchise the brand on.
Obviously franchising for something like this is the
ultimate power move. You scale up so much quicker if
you can find a repeatable formula that you can franchise.
(26:08):
And in fact, they've expanded toover 300 locations over the last
six or seven years via franchising.
And listen to this as a growth rate.
U.S. sales grew 57% in 2024, reaching over $600 million.
And although the deal value has not yet been announced, it is
(26:30):
expected and the CEO didn't actually deny that it was around
the billion dollar mark. So this is an 8 year old company
that's received actually very very little outside investment
in the grand scheme of things. Owned by a bunch of mates that
set up some chicken out of a van.
Oh, it's the dream. In a car.
Dream, Steven. And now and I and I, and there's
(26:52):
lots of other stuff that I want to talk about, but I really want
to finish. I've got some great pictures of
the founders, by the way, in my notes looking extremely cool so
early. Dave's investors aren't the only
ones making money from the deal masterminded by Phelps, who's
the CEO that came in in 2019. The company plans to give dozens
of its employees significant bonuses.
(27:13):
And then organization says he literally made 20 millionaires
overnight from this deal. So what a story, right?
Eight years. You've got your again, is it
survivorship bias? Do we do we cover all of the the
shacks and the and the the pop ups that just don't make it?
(27:34):
Question those because you've you know, you've been a founder
before as well as working in banking in your in your various
episodes you've had. So in terms of here, they start
in 2017, but they took on what seems to be a pretty
experienced, well versed person in 2019.
So they're obviously making a lot of money.
(27:55):
They could afford to do that. Do you think that was the pivot?
Because I struggled to kind of see how you can have 10 bucks in
your back pocket or 900 bucks and they take sell it for a
billion seven years later. Is it that yeah, they're,
they're the brand, they're the cool guys, they've got the
recipes, yes. But in order to scale to that
magnitude and that accelerator, that speed, is that where that
(28:17):
key hire, do you think it would have played the biggest?
Totally, totally. And this guy Bill Phelps, again,
a bit of a kind of industry legend, put some money into the
business, became CEO in 2019. And this for me is such a good
learning for any young person that is looking to do something
in the entrepreneurial space. There are some entrepreneurs,
(28:40):
especially young ones or inexperienced ones that can
scale through the stages of business growth.
Those are the exception. The rule is you've got something
extremely valuable as a businessowner or as a founder bottle,
whatever that is. And in the case of this company,
it's all about the brand. It seems like these three guys,
(29:03):
they're like legends in terms ofmarketing, legends in terms of
building the brand, all of this stuff.
Don't waste their energy kind ofputting together a franchise
infrastructure. That's not their sweet spot.
Get them on the thing that they do best, bring in a legendary
CEO. They did it within two years to
have that level of, you know, soknowing this from experience,
(29:26):
having early success can easily make you think that you are a
little bit of a, you know, a little bit of a player, right?
Oh yeah, I can scale this thing.So to have the to have the
self-awareness to go, all right,two years in, we need to bring
in someone experienced. It's super cool.
It's a brilliant, brilliant story.
(29:47):
So fair play to these guys. And and I'm going to challenge
you because I know that they've released a new, a new restaurant
in the, in actually in, in London.
I'm going to challenge you to the Reaper, which is the most
extreme level of spice. It requires A liability waiver
(30:08):
and it's sent at least one customer to hospital.
I'm not going to be doing it, but I'm going to.
I'm going to watch you do. You know what, it depends.
Like what are the rules of the, the the game here?
Because I reckon it's not about it going in, it's about when it
comes out that I'll have the problem with.
So if if it where? Where's the winning post?
Well, let's just hope I'm not there for the for the latter.
(30:32):
On that pleasant note, let's wrap it up there.
Yeah. Let us know if there's any
questions, comments. I think we did, we did ask a few
things there, which are US listeners will be more favours.
So yeah, do drop us a comment Ifyou are not already subscribed
to the channel. Please do.
More episodes coming on a weeklybasis and don't forget to check
out the link as well. If you're a student this summer
(30:54):
and you're thinking about your potential career in finance,
upscaling, improving your CV, then check out the summer
Analyst training program. Link is in the show notes.
Thank you, Stephen. Thank you so much, Ann.
All right, take care.
Hello and welcome back to another episode of the Deal
Room. And we're going to talk about
the investment banking scorecard.
We like to dive into this every now and again by popular demand
to see who the movers and shakers are.
But there is one geographic region that is up over 400% year
on year. Do you know who you're about to
(00:22):
find out? Really interesting stuff.
And also we've had a couple of M&A deals that we want to touch
upon. One, the complex acquisition of
Total Industries by dub www.toyotasohow on earth has
that happened and what is going on there?
Definitely keeping it in the family And then discussing
Disney acquiring the final 33% stake in streamer Hulu Mehta's
(00:46):
$14 billion investment in Scale AI.
And then by popular demand as well.
There was more than one comment actually, Stephen, on this one.
You know, people have got an affinity here for, for chicken
wings because raw capitals investment in Dave's hot chicken
and you've, you've made a note here saying this is a game
changer. So I'm definitely interested to
(01:07):
hear about this one. This is an absolute game
changer. I tell you what.
I went on Dave's Hot Chickens website and I'm not very good
with spine. So I have to say and I kind of
came out in a bit of a a kind ofa spice sweat just looking at
the images of the website. So I don't think they're one for
me, but it's definitely worth hanging on until the end of this
(01:29):
episode because the the origin story of this billion dollar
chicken company is quite remarkable.
I really. I did the same.
I had a quick look and I was like, I mean, look, you have to
any US listeners who need to forgive us because this isn't
within our our region, but I waslike, OK, what signing waivers
(01:51):
because of the level of spice and some people have died or
something. I was like OK, so these are.
Some hot? Only in America.
Yeah, America. So yeah, but perhaps we can
start then with with the scorecard?
Yeah, absolutely. Yeah, we're going to cover
these. We're going to go pretty thick
and fast into these. There's a lot of stories and a
lot to get through, but I reallywanted, yeah, OK, every kind of
(02:11):
6/6 to 8 weeks, we take a look at the investment banking
scorecards and we sometimes do adeep dive, sometimes we don't.
But this one, one number one country stood out.
So I've got in front of me a chart that says year to date
deal value in dollar billions and year on year percentage
change in terms of M&A and Japan414% increase in MNA activity.
(02:40):
And this is something that we really, really need to be aware
of because Japan was not necessarily previously closed
for business from an MNA perspective, but it was deemed
to be a little bit of an outlier, not necessarily even a
hinterland. They just had a different way of
doing things. Very, very complex conglomerate
(03:01):
structures, not a great willingness to entertain
activist invent investors, no real private equity involvement
in it for a number of years. But there's been so much stuff,
so many tailwinds that have led to this 414% increase.
And it is worth noting for any students out there that we live
(03:23):
in a global world, right? And we follow the money and the
money is heading towards the Middle East and the money at the
moment is heading towards Japan.So again, something to be aware
of. But let's look into why the
414%. There are some macroeconomic
factors which I think we've discussed before.
(03:44):
The weak yen meaning that meaning that a dollar
denominated buyer would be able to buy, get more bang for their
buck, quite literally low interest rates.
Obviously, there's been a 30 years of deflation in Japan, so
borrowing is relatively cheap, but not.
But more importantly, more structurally, there has been a
(04:05):
shifting of the corporate landscape.
And I know we talk a lot about deals and we like on this
podcast, we like numbers and we like the big strategy stuff.
But sometimes it's important to look at the legislation and the
impact that legislation has on the nature of a particular
industry. So there was a market, there
(04:25):
were a series of market structure reforms in Japan,
starting with a change to the corporate Governance code
introduced by the government in 2022.
And there are more initiatives, for example, the TSE and the
METI. The TSEI know very exciting
stuff. The TSE announced its action to
(04:46):
implement management that is conscious of capital and stock
price. Now, if you're an American
listener or even a British listener, you would really,
really hope that management is interested in the cost of
capital and in their stock price.
But what's tended to happen in alot of large companies in Japan
(05:08):
is they're still controlled by families or or groups of private
investors. There may be a small free float,
but the their interest in the oscillations of a share price
hasn't hasn't really hit them. So, so this isn't moving Japan
more to a kind of western model and it's opening up a bunch of
(05:31):
interesting stuff and these companies and now in the market,
you know, the game is afoot. And remember Japan has got some
of the best industrial companies, manufacturing
companies. And I'll, I'll pause in a
second, but I've just got a little image in front of me from
AJP Morgan study that says that inbound MNA activity over the
(05:55):
last 14 years has grown compoundannual growth weight rate of
almost 8%. That is significant growth over
a 13 year year period of US acquirers, EMEA acquirers buying
assets in in Japan. So just finally to close this
(06:15):
just conversation then for context, because obviously
people will think, OK, 414% likewhat is the US and Europe?
So just so we're clear, what arethose comparables on a
geographic basis? Yeah, Japan's still small.
It's it's $150 billion of deal value year to date compared to
Europe double at 300 billion, the US 750 billion.
(06:41):
So it's so it's still small, butthe size of the deals are
getting quite interesting, especially if you've got your
M&A advisory hat on. I'm just going to give you a few
of the biggest deals and maybe end on the Toyota deal that you
mentioned at the top of the episode.
So 3.3 billion deal, Bain Capital private equity,
(07:01):
acquisition of Mitsubishi TamabePharma Corporation from the
Mitsubishi Chemical Group. This sounds a little bit like
the splitting up of a conglomerate and a private
equity buyer, right? Toyota and Daimler Truck merged
their Japanese units, 6.4 billion.
Another may be breaking up of that Toyota conglomerate or at
(07:22):
least restructuring. And Nippon Life acquiring
Resolution Life for over $10 billion.
And then another take private, KKR and JIC taking a company
called Top Con private but for 2.3 billion.
But the biggest one that was announced last week is Toyota
(07:43):
acquiring Toyota Industries for $33 billion.
And this is, this is such an interesting deal because again,
in the in, in normal M&A or in Western M&A, you would think
about the acquisition price, youwould think about whether it was
(08:04):
a competitive process, you wouldthink about the acquisition
premium. All of these things would go
into the analysis that you do and the things that we talk
about. But in this case, there was only
really one buyer that could everreally buy Toyota Industries and
that was Toyota because Toyota already owns 39% of Toyota
(08:27):
Industries. And it will happen because the
voting rights are so heavily stacked in the buyer's favorite.
So it's almost akin to buying a subsidiary.
Well, it is akin to buying a subsidiary, except that there
are other, it's a listed company.
So there are public asset managers, public investors that
(08:49):
have invested in Toyota industries separate to Toyota
the the topco. So these investors are going no,
no, like you paid a bargain basement price for Toyota
Industries because there's not going to be this competitive
environment because you're the only buyer in town and we're
going to get screwed over here. I think the premium was a 23%
(09:12):
premium to the pre speculation price.
So it's so interesting to see how these different tie UPS,
conglomerate discounts, unwinding of long criticized
cross shareholding. It's starting to play out slowly
and surely in Japan. Cool.
All right, well, let's move on and talk Disney and Hulu.
(09:36):
Disney and Hulu, well, look, shout out to the summer
analysts. We've got our first summer
analyst cohort this week and forthe next two weeks and we've got
two more cohorts coming up laterthis summer which are still open
if you want to get involved. Link in the show notes folks for
those interested. Link in the show, you basically
(09:59):
have to listen to Anthony at 3:00 PM every single day for
three weeks. So if you want to do that as
part of your summer, then pleasedo.
But it's a lot more than that, obviously.
But anyway, the reason why I saythat is because Disney is one of
our new simulations that is coming exclusively to the summer
analyst program. It's a 24 hour simulation, lots
(10:20):
of interesting stuff, some of the parts analysis, valuation
analysis, some merger modeling as well.
So very, very relevant that thisheadline popped up a few days
ago. And the headline is that Disney
is to pay Comcast $439,000,000 to take full control of Hulu,
(10:42):
ending a lengthy valuation process.
And this is such an interesting story just to get that extra
layer of understanding about different M and A scenarios.
So let me give you a very, very brief background.
Hulu started, I think it was launched in like 2008 and it was
(11:02):
actually a joint venture between21st Century, 21st Century Fox
and NBC Universal, which later was bought by Comcast.
So effectively 21st Century Fox owned 66% and Comcast owned 33%.
In 2019. What did Walt Disney do?
(11:23):
They bought 21st Century Fox in a mega acquisition.
They effectively gained control over Hulu and Hulu which has now
got upwards of 55,000,000 subscribers and released shows
like The Bear which obviously was extremely popular.
It's part of Disney's streaming strategy.
(11:45):
Right, but 33% still owned by Comcast.
There was an agreement in 2019 that that 33% would eventually
get sold by Comcast to Disney, but at a valuation floor of a
valuation of $27.5 billion. So pro rata that for 33 billion
(12:10):
wine back to or actually go forward to 2023.
And these discussions went live.Comcast wanted to shed the rest
of the 33%. Disney wanted to fully
consolidate and realized Hulu asa 100% owned entity.
What Disney did is it paid the $27.5 billion pro rated floor to
(12:34):
say, look, you know, that is theminimum that we're going to pay
for this remaining 33%. Let's engage with a bunch of
valuers, a bunch of arbitrators to try and figure out whether,
you know, as of 2024, now 2025, this thing, Hulu is worth much
(12:55):
more than 27.5 billion. So Disney had its advisors, its
arbitrators. Comcast, sorry, its appraisers,
sorry, Comcast had its appraisers.
Disney was coming out around 27.5 billion.
As you can imagine, Comcast was like, no, I think this thing's
probably worth more like 40 billion, which would give them a
(13:15):
much bigger ticket. RBC Capital was engaged to do
the appraisal, the third party independent appraisal, which
Disney and Comcast said, look, whatever they come up with in
terms of the valuation over and above 27.5 billion, we are going
to be happy with, right? That's it.
(13:35):
So this 430 thirty 8.7 million is the result of the valuation
over and above the 27.5 billion floor, giving the total
enterprise value of Hulu somewhere in the region of 29
billion. But it's just a really, really
interesting case study about howmessy these things can be,
(13:59):
right? You buy a company, it has a non
wholly owned subsidiary. What are you going to do with
it? How much do you value the
remaining percentage? And interestingly enough, the
reason why you have to go through this appraisal process
is because no one else is going to buy that 33%, right?
It's a captive asset to Disney. It's already been integrated
(14:23):
into their financial statements and into their strategy.
So you've got to have a fair market valuation that isn't
determined by a bidding process or a competitive process.
I can't remember all the details, but I seem to remember
Disney having lots of issues, let's say with the succession
(14:44):
planning. And is it, is it Bob Iger?
And he was coming and going and then there was kind of just
foray down into double down intostreaming.
But then kind of Netflix is justsuch a beast.
So just talk to me like what's the streaming landscape and
what's the strategic implications of them now
executing on that remaining state?
Yeah, absolutely. It's a, it's a really good
(15:05):
point. And Bob Iger's come and gone I
think three Times Now he's he's back at the helm.
He's one of those people a little bit like Howard Schultz
at Starbucks. He he just can't, he just can't
let it go. And Disney is an extremely
complex beast. Anyone that does the summer
analyst program with with us in in over the next few weeks will
realize that it's three different divisions.
(15:25):
Entertainment experiences and sports are wildly different,
right? You've got theme parks sitting
alongside Disney Plus, sitting alongside ESPN.
The growth in the business quiteunderstandably is coming through
streaming. And if you've got Disney Plus,
if you've got Hulu and if you'vegot ESPN on demand, you are
(15:49):
starting to create a pretty compelling package.
And I think the way that we needto be thinking about the world
of streaming is what are the twoor three packages that are
absolutely necessary for me to have the best overall viewing
experience. And it might end up that it's
Disney with its Hulu and now andwith its ESPN and its Netflix as
(16:15):
the two big players that continue to grow in this
landscape. I'm not entirely sure, but the
growth of Disney Plus is outstripping everything else in
that business. That's super interesting.
I'm definitely keen to see our analysts prayer output, let's
say from their analysis. But let's let's move to show on
and talk a little bit about something I've seen lots of.
(16:38):
You know, if you're part of the very niche finance memes on
various social platforms, you would have seen quite a lot of
Meta and AI in the last week or so.
So, so what's this deal, Zuckerberg?
It seems we've gone full board into the metaverse pivot, now
AI, and now he's doubling down again.
(17:01):
Yeah. Can I just say, and obviously if
anyone listens to this podcast regularly, you'll know that I'm
not a not a huge fan of Meta. Can I just say the integrating
Llama it's LLM into WhatsApp is one of the most annoying things
in the history of the world. I want my WhatsApp to do what
(17:21):
WhatsApp does, which is just a chat function with my friends as
intuitive as possible. I don't need to get them to
write me a story or to search the web.
I've got other things that can do that.
It annoys me and I know that Meta is trying to become this
everything app, but it's still are really, really frustrating
and not something that I asked for.
It just comes right. Anyway, rounds over.
(17:44):
So this story, Meta plans to invest $15 billion in Scale AI
in a bid to catch up with rivals.
So this is actually a $15 billion purchase of a 49% stake
in this company Scale AI. And you might remember from
previous episodes whether it's, well, there's a lot of different
(18:08):
case examples of the likes of Microsoft and Google.
I think it was Microsoft paying $650 million to hire Mustafa
Suleiman and his top lieutenantsto get them away from the
company that they were working with.
Again, huge antitrust issues. What have it happened to that?
I remember that at the time and that was like, so what's he done
(18:30):
like since then? It's gone quiet.
So, so Inflection, the key members of the Inflection team
have joined Microsoft and it is currently being investigated by
antitrust. Same goes for Google paying 2.7
billion for a similar arrangement with Character AI.
Obviously same goes for the arrangement between Open AI and
Microsoft. It's an acquisition through the
(18:52):
back door in order to avoid regulatory scrutiny.
And this 49 percent, $15 billion, you know, it's not a
control controlling stake, but the CEO of of the company of
Scale AI is joining the new kindof Meta Super Intelligent Labs
(19:15):
as part of that team. So it is an acquisition by any
other means, right? Just to be clear, this Alexander
Wang character, he's what, 28 years old?
Something like that. Yeah, he's 28 years old and
there's, I don't know whether there's kind of sour grapes and
I don't know enough about the industry to understand whether
(19:37):
he's just a very good show person and is very, very good at
kind of pumping a story or whether scale really is this
transformational technology. What scale does, by the way, in
my mind is super, super basic. And again, please correct me on
the chat, on the comments if I'mwrong.
It does the first thing wheneverwhen I'm researching this, first
(19:58):
thing I'm looking at is that onesentence and the one sentence is
scale. AI does basically tagging,
manual tagging for data that goes into large language model.
So for large language models, it's all about the quality and
the structuring and the tagging of huge, huge data sets, right?
(20:19):
And often in order to get it 100% right, the tag needs to be
done by a human. So.
Cancer, you know, read the word cancer in a sentence and think
that that relates to medicine. Something really, really basic,
right? Some basic tagging.
And that's what this company started at.
And obviously it's expanded to fill in other kind of enterprise
(20:40):
elements. But I'm really interested to see
whether this is properly going to move the needle for Meta that
is well and truly behind the 8 ball with regards to the release
of it's LAMA four large languagemodel, which has been roundly
trounced A for being terrible, but B also basically cheating in
(21:07):
the in the kind of independent model, the independent
University of Berkeley study, they cheated and basically said
it was as powerful, more powerful than ChatGPT 4.0,
whatever it might be. But actually that was only under
certain parameters and it wasn'treleasing that version of the
model and that was. You're talking, you're talking
(21:28):
down meta again. I'm going to have to come on,
come on where everyone knows. When you see that chart and they
release like the 4.01 issue of the software, we all know that
that's, you know, they they've played that they've fudged to
books. They're all doing that.
Surely you can't just be meta that's doing this.
No, I don't know. I don't know enough about it.
And please do put a comment in the YouTube if you know more
(21:50):
than me. And again, maybe this is my
inbuilt bias against Meta. If someone is going to control
the AI landscape, I'm not entirely sure I want it to be
Mark Zuckerberg. But anyway, there will be
regulatory scrutiny, by the way,so this might not happen.
One thing as well, I know you'rea big fan of Reddit and your
your base case for that was because of the fact that they're
(22:12):
sitting on this kind of goldmineof unstructured information
almost that would require systematic AI driven labeling
surely? So isn't there?
Isn't that like a use case of where this type of thing would
be? Yeah, it's definitely a use
case. And I think the use case
probably extends most saliently to data sets that are either
(22:34):
proprietary or in some way classified or yeah, yeah, or
restricted in some way, shape orform.
Right. So they've just released with
with their training, they've released a kind of, I can't even
remember what it's called, a military LLM application layer
because they've been through theprocess of structuring and
(22:54):
helping to tag and organize vastterabytes of data that is held
in different levels of classification.
So I think that is a really interesting use case.
Reddit possibly as well. I think there's just something,
there's something lurking in Steam, Steam, Barnett's WhatsApp
messages that you just don't want out.
I think that's the the underlying threat here.
(23:17):
I can tell you there's a lot of things lurking that I wouldn't
want to actually come out. All right, let's move on.
Yeah, let's let's let's talk hotchicken.
Chicken wings. This is this is my favorite
story and thank you for those people that said put it on the
podcast because we're, we speak so often about high finance and
big business and LLMS and GPTS and all this kind of stuff,
(23:40):
which quite frankly is not my area of interest.
Chicken, however, is definitely an area of interest for me.
So the top, the headline is thatRaw capital you might have, you
might remember those guys from the acquisition of Subway, which
we covered a couple of years ago.
Raw Capital has acquired A majority stake in Dave's Hot
(24:00):
Chicken. Now days hot chicken.
This is a brilliant origin story.
I'm just going to give you a little bit of the background.
So at the age of 24, the founder, our man Organician,
sorry for butchering the name, was making $50 a night at a as a
stand up comedian. And then he used just like, no,
(24:21):
I think this could be a little bit of there could be something
here in this kind of chicken space.
He loved Nashville hot chicken so he pulled $900 in savings
with I think his bro with his childhood friends Dave and
Tommy. I assume Dave is the Dave's hot
chicken and opened as a pop up in a Los Angeles parking lot
(24:41):
right? $900 They beg stolen, borrow.
I don't know if they stole but they definitely begged and
borrowed to get the truck and toget the kit and within at the
listen to this. At the end of their second
month, they pay themselves for the first time, each taking home
around $10,000 in cash. Within two months, they had made
(25:03):
10 grand each in that month. That is insane.
That is bonkers. Yeah, and like what?
So I'm just saw some notes here.They were selling Nashville hot
chicken. I'm going to be your super
British here. If you're an American listener,
please write me a short description.
What's Nashville hot chicken as opposed to a different region of
(25:24):
America, please? Yeah, I can't help you with
that. But they started making money
and then in, you know, this is acompany that was a company,
quote UN quote, that was foundedin 2017, in 27 or 8 years ago in
2019, an investor group, which includes now Dave CEO, Dave's
Chicken CEO Bill Phelps. He's a bit of a legend in the
(25:46):
industry. And Samuel L Jackson bought a
stake in the company, which is and they and and in order to
scale and then franchise the brand on.
Obviously franchising for something like this is the
ultimate power move. You scale up so much quicker if
you can find a repeatable formula that you can franchise.
(26:08):
And in fact, they've expanded toover 300 locations over the last
six or seven years via franchising.
And listen to this as a growth rate.
U.S. sales grew 57% in 2024, reaching over $600 million.
And although the deal value has not yet been announced, it is
(26:30):
expected and the CEO didn't actually deny that it was around
the billion dollar mark. So this is an 8 year old company
that's received actually very very little outside investment
in the grand scheme of things. Owned by a bunch of mates that
set up some chicken out of a van.
Oh, it's the dream. In a car.
Dream, Steven. And now and I and I, and there's
(26:52):
lots of other stuff that I want to talk about, but I really want
to finish. I've got some great pictures of
the founders, by the way, in my notes looking extremely cool so
early. Dave's investors aren't the only
ones making money from the deal masterminded by Phelps, who's
the CEO that came in in 2019. The company plans to give dozens
of its employees significant bonuses.
(27:13):
And then organization says he literally made 20 millionaires
overnight from this deal. So what a story, right?
Eight years. You've got your again, is it
survivorship bias? Do we do we cover all of the the
shacks and the and the the pop ups that just don't make it?
(27:34):
Question those because you've you know, you've been a founder
before as well as working in banking in your in your various
episodes you've had. So in terms of here, they start
in 2017, but they took on what seems to be a pretty
experienced, well versed person in 2019.
So they're obviously making a lot of money.
(27:55):
They could afford to do that. Do you think that was the pivot?
Because I struggled to kind of see how you can have 10 bucks in
your back pocket or 900 bucks and they take sell it for a
billion seven years later. Is it that yeah, they're,
they're the brand, they're the cool guys, they've got the
recipes, yes. But in order to scale to that
magnitude and that accelerator, that speed, is that where that
(28:17):
key hire, do you think it would have played the biggest?
Totally, totally. And this guy Bill Phelps, again,
a bit of a kind of industry legend, put some money into the
business, became CEO in 2019. And this for me is such a good
learning for any young person that is looking to do something
in the entrepreneurial space. There are some entrepreneurs,
(28:40):
especially young ones or inexperienced ones that can
scale through the stages of business growth.
Those are the exception. The rule is you've got something
extremely valuable as a businessowner or as a founder bottle,
whatever that is. And in the case of this company,
it's all about the brand. It seems like these three guys,
(29:03):
they're like legends in terms ofmarketing, legends in terms of
building the brand, all of this stuff.
Don't waste their energy kind ofputting together a franchise
infrastructure. That's not their sweet spot.
Get them on the thing that they do best, bring in a legendary
CEO. They did it within two years to
have that level of, you know, soknowing this from experience,
(29:26):
having early success can easily make you think that you are a
little bit of a, you know, a little bit of a player, right?
Oh yeah, I can scale this thing.So to have the to have the
self-awareness to go, all right,two years in, we need to bring
in someone experienced. It's super cool.
It's a brilliant, brilliant story.
(29:47):
So fair play to these guys. And and I'm going to challenge
you because I know that they've released a new, a new restaurant
in the, in actually in, in London.
I'm going to challenge you to the Reaper, which is the most
extreme level of spice. It requires A liability waiver
(30:08):
and it's sent at least one customer to hospital.
I'm not going to be doing it, but I'm going to.
I'm going to watch you do. You know what, it depends.
Like what are the rules of the, the the game here?
Because I reckon it's not about it going in, it's about when it
comes out that I'll have the problem with.
So if if it where? Where's the winning post?
Well, let's just hope I'm not there for the for the latter.
(30:32):
On that pleasant note, let's wrap it up there.
Yeah. Let us know if there's any
questions, comments. I think we did, we did ask a few
things there, which are US listeners will be more favours.
So yeah, do drop us a comment Ifyou are not already subscribed
to the channel. Please do.
More episodes coming on a weeklybasis and don't forget to check
out the link as well. If you're a student this summer
(30:54):
and you're thinking about your potential career in finance,
upscaling, improving your CV, then check out the summer
Analyst training program. Link is in the show notes.
Thank you, Stephen. Thank you so much, Ann.
All right, take care.
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