The Future of Dealmaking: North America

Hello everyone, and welcome to the North American stop Future of Deal Making webinar series. My name is Bill Lane, I'm a Director of sales here at SS&C Intralinks, and I will be your moderator today for the webinar. I'm joined by an esteemed panel of guests, which we'll get to some introductions in a moment, but what are we going to cover today? So in 2024, companies were playing a bit of the waiting game when it came to deal making, whether it was uncertainty in geopolitics or waiting for central banks to, you know, revise interest rates or even inflationary concerns. Folks were on the sidelines waiting for things to stabilize.

And the rebound was not quite what everyone was expecting. So today, we put that in the rear view, and we're looking forward to 2025 and what to expect in deal making this year. What are deal makers going to do? What are they going to pursue? What types of deals are they going to pursue? All of that will be covered today as well as other things like AI and strategic technologies that will be used to help facilitate deal making. So without further ado, let's get started and a few items of housekeeping and we'll get to the introductions. We're looking forward to the webinar today and we will have some Q&A at the end of the session.

So feel free audience to type in your questions into the Q and A box and we can take those towards the end of the session when we do a live Q&A with the panelists. So again, without further ado, I'm going to have our panel introduce themselves. And Richard, if you could start us off, that would be, that would be. Good thing. Hello everyone. I'm Richard Lichtenstein. I'm an expert partner at Bain and company. I'm also our Chief Data Officer for our private equity and investors business.

Over the years, I've supported hundreds of deals as a as a Bain advisor, I lead our work around GenAI I and investing. So I spend most of my time these days working with funds on various topics related to AI, whether that's internal operations, how you can use AI to make yourself more efficient, or a lot of diligence work of, you know, if we're looking at a new business, is GenAI I going to be good or bad for that business? And also portfolio work, looking at the portfolio companies and thinking about GenAI I strategy there. And a lot of that's is around exit. So, you know, if you're going to exit a deal, how do you make sure that they're well positioned when someone who's diligence in them ask the AI question?

So anyway, look forward to discussing. It's it's obviously a hot topic and yeah, should be a fun panel. Great. Thanks. And Henry, over to you. Sure. Thanks Bill and thanks assistance for putting this on Henry Hagenbuch here. I'm Senior Managing Director, Head of Mergers and Acquisitions at Lido Advisors were about AI, don't know depending on the day, $32 billion RAA and I run the efforts on the inorganic growth side and I've been doing that for a good chunk of my career in the wealth management space and looking forward to talking all things deal making today.

Thanks. Excellent. And Eric, last but not least. All right. Good afternoon, everybody. A pleasure to be here today. I'm Eric, former investment banker a long time ago and then transitioned into in house M&A and integration work. Did that for seven years with AB InBev, pretty interesting times with a lot of transactions big and small. And since 2017, I've been doing that with Ferrero and a corporate development capacity as we start to ramp up in the North American confectionery market there with a number of carve outs to my name in that time frame.

So happy to talk through experiences and go forward plans today. Thanks for having me. Awesome. Well, a wealth of knowledge on the call today. So let's kick it off. And with the first first question, we'll take a little bit of a look at 2024. So the first question, Eric, I'll direct this at you since you just finished your introduction. How would you sum up 2024 deal making environment and what's exciting you mostly about heading into 2025? Great question.

And I think my answers to both of those are actually linked a little bit, right. As we as we move out of a high interest rate environment, I think we're starting to see a deal appetite increase and also a little bit of a realization that or at least an expectation perhaps that the decline in borrowing rates that we've seen may not continue to go down short term. So I think that's putting a lot of interest in capital towards the forefront of M&A and I think it's creating conditions such that in 2025 I would expect to see substantially more activity than in 2024 and my remit would will represent that I expect as well.

Great, Eric. And and to expand upon that slightly, in your role, where do you see the greatest opportunity? Yeah. So a great question. It's a little bit specific, of course, to my employer, but we are targeting strategic investments in a couple of spaces. One, it's a bit independent of things like macroeconomics necessarily, but more consumer behavior as we see the impacts in the North American, Western European marketplace of people shifting towards healthier foods, better for you even legislature, right that I was making a lot of news in the US, especially in the past couple months.

There's a lot of impetus to rebalance portfolios. And I think you're going to see that from Ferrero. You're also going to see that from a lot of the other leading consumer products companies. So I think that is going to lead, lead to a lot of M&A activity perhaps on the smaller scale as those large enterprises buy assets that are going to rebalance their portfolio and give them headways into new channels. That will definitely be a theme that I expect to play out more specifically to to Ferrero and to my work. We are primarily a European company now, 3 billion in the US So we're starting to scale up well, but that remains a strategic priority that is open to the marketplace and I would expect aggressive activity on the geographic standpoint as well, not just portfolio rebounds.

Yep, well I still love a sweet snack. So looking forward to your work. And Henry, I'll ask you the same question. So how would you sum up 2024 deal making for yourself and what are you looking forward to in 2025? Yeah. Thanks, Bill. No, it's a, it's a good question. I think sector specific for me in the wealth management industry. I mean 2024 I think was an M and a record, you know, for us and, and you know, despite all the consolidation, you know, I think our industry is actually growing based on the number of new advisors entering the space.

So you know, while, while there is, you know, still right for consolidation, the fragmentation is growing from that perspective. I think if you look at a big picture though, you know, from a flow of fund standpoint, capital is very meaningfully coming into the space predominantly from private equity. But now you're even seeing sovereign wealth funds get involved, venture capital. So I don't think the pace and interest will necessarily wane in the foreseeable future. You know, I think in this day and age there are a number of different acquisition models, qualitative reasons for why, you know, someone will join a particular firmer platform. And I think as long as that you know continues to remain, this industry will continue to be a robust and healthy market for M&A.

Excellent. Well, thank you for that. And and Richard, since this question kind of sets the scene for our discussion today, how about yourself? Is there anything you'd like to add from your point of view? Can't hear you, Richard. Oh, there you go. You hear me? No. Yeah, OK. Sorry. OK.

You know, as you gathered, my beat these days is around GenAI I. So that's sort of where I think I spent a lot of my time thinking. I mean, if I look back at 2024, you know, I do think that one of, you know, obviously I was a big theme. And I mean, we, we've done some surveys of investors and I think we found that like 70% of investors like at least killed at least one deal because of GenAI I and likewise, you know, I think like 80% of investors got more excited about a deal because of AI, right?

So like they're, these are common topics. I think what I see for 25 on the AI side is, you know, it's going to be a growing, you know, sort of table stakes question on a new deal of, you know, what, how are they thinking about AI? What are they doing about it? How are they thinking about the opportunities? How are they thinking about pricing? You know, all the sorts of questions will become more common, but I also think that funds will be more comfortable starting to underwrite some of that opportunity, right? And we'll start to see.

Oh well, you know, I've now had at least a couple of assets where we've done GenAI high stuff and it started to work. And so therefore I'm more willing to lean on an asset that seems like it has opportunity. So I think from that standpoint, they'll be themes there. I mean, obviously, I hope that we see a lot of deal activity in 25. Like I want to share the optimistic sentiments of my fellow panelists here and hope for the best, you know. And I hope you know that I see the same signs they do and hope for hope it all looks good.

Excellent. Well, thank you all for kicking us off with that that question. So I'll ask Henry a question, right. And I think this is a topic that is top of mind probably for audience as well coming from 2024 in an industry that did pretty well in M&A and it's about financing conditions, right? As we look towards to 2025, how do you think financing is going to change within the next 12 months within the deal making space? Yeah. No, I think it's an interesting question.

I mean, you know, maybe exogenous events in the market could potentially derail or delay, you know, the M&A in this space. But even then though, I think, you know, buyers look at that opportunistically, you know, I think again, harping on the, you know, the varying acquisition models that I mentioned, I mean, buyers can also get quite creative around catch up provisions and earn out. So you know, like I think you'll see buyers, you know, structure deals around market events from that perspective. So it's it's kind of a nothing burger, at least in this industry from that, from from from that standpoint. Great.

And and Eric, from from your lens, from a corporate perspective in terms of financing, how are you all viewing this this year and, and what are you looking to, what improvements are you looking to see to help foster deal making? Great question. I think I would have a more fruitful answer if we took it in context of my last employer, ABN Dev, right, where there's. Yeah, they're, they're, they have a very heavy download leverage is a huge part of their M&A strategy. And I think what you're going to see for players in that condition is that they're going to opportunistically try to rebalance their debt portfolio right as as rates have come down from the past couple of years and likely be returning to the market to try to deploy new capital at those lower leverage rates.

Ferrero on the other hand has a a pretty unique circumstance where it's one shareholder business, very high cash flow, right. And most of the M&A that we execute is call it 2 1/2 billion dollars at a time or less. And believe it or not, a lot of that is actually cash often due to the capitalization of our our business and the person strategy of the Ferrero family. So yeah, a little bit of A Tale of Two Cities there, but I hope that is elaborative of theory versus the practical reality for me today. Yeah, No, I think it's it's good for right the market in the audience to be aware there are deals happening on both sides of those, right.

We hear in the news all the time in the market is tied to alright, we'll financing improve, right. But deals are still getting done in specific areas, right, on a cash basis, right. So both of those things are happening and we'll continue to do so. So Richard, I want to just point a question towards towards your way by given you look across multiple, multiple industries and sectors may focus across a lot of clients in your current role. Where do you what, what industries and sectors do you see having the most potential for growth in 2025? Yeah, it's a great question.

I mean, I think that, you know, I mean, tech obviously is a sector which, you know, in particular B2B tech is a sector that's, you know, grown and grown in importance in terms of private equity deal making. I, I see that frankly continuing and I mean, which is a boring answer, but I see that continuing. I think that, you know, software is obviously gets bigger and bigger. I think with GenAI I software will be able to do more and you will have to see a lot more software assets that are, are thinking about how they can deliver value to their customers in different ways, which potentially makes them exciting.

I think that, you know, healthcare also continues to be a big sector and I think will be, I mean, I think it's a sector where there's tons of innovation and new things and continued, you know, penetration curves for many types of products that make them so attractive. And so, you know, I think those are sectors where I see a lot of, you know, where at least I feel like the majority of the lot of calls that I'm on seem to be heading. And I guess the other one I would just say is like Information Services and services businesses and business services in general also remains a hot topic. I think again, AI makes it even hotter topic because there's a question of like any business that has a bunch of people running around it, there's now a question of like, could AI make those people not make them go away, but make them, you know, 20 percent, 30% more productive, right?

And does that, you know, it does that create an opportunity? And so I do, I do see continue, you know, maybe slight uptick in, in a number of sort of services type businesses that I've been looking, you know, talking about recently. But you know, I guess answer because I feel like I don't think the mix in 25 is going to look that different from the mix in 24 I guess is what I'm saying. So it's not that exciting. And that's, that's an OK answer and consistency is OK if we think that's where it's going to be.

You know, going off of your, your answer, right, I'm going to pose this to Eric and Henry who, who are specific within industries, right? So obviously they're, I hope they're probably feeling positive about their own, their own industries and sectors. But for, and we'll go to Henry first. What is the biggest risk within the wealth management space that you you are all looking at this year or being aware of? It's a good question. I think, you know, I, I can, I can be specific to my, to my firm and how we think about M&A where, you know, we, we, we care about culture and alignment and we're not willing to compromise that just for growth.

So, you know, when we think about mergers and acquisitions, you know, we want to look at the human capital that's coming to play. And so we take a very concerted approach to that when it relates to ensuring that they're the right partners that are that are joining the firm and that, you know, they can be 1 + 1 greater than two as the old adage goes, etcetera. And so, you know, I, I think it's a lot easier to screw that up than it is to, you know, keep the moral, you know, keep the compass point N etcetera. And so that that's ultimately kind of the biggest risk that we we look at is just making sure that we're staying true to our approach and, you know, being a lot more selective and qualitatively driven from that perspective.

Excellent, makes a lot of sense. And Eric, in in your role, what's the, what's the biggest risk you see in getting deals done in in 2025? I think it's a interesting response to that question in that I don't know how much difficulty there is in getting the deals done so much as there's challenges in sourcing or creating the right opportunities for deals in the 1st place. And I would tie that back to my previous comment about consumer shifting. And you know we operate in an environment now where most CPG leaders are are very large, right, what we all interact with on a day-to-day basis.

So to change the composition of those portfolios requires large acquisitions, integrations, etcetera, right or to greenfield a smaller one. And I think the reality of the situation is that the consumer preferences are shifting so fast that it's more smaller companies or even start up innovations that are able to meet that need. And as a byproduct of that, they're not large enough to really change the composition overnight. So I think that is the challenge in the M&A marketplace that I'm seeing is not so much the capability to get deals done 'cause I think the balance sheets are pretty healthy for the larger CPG players. It's the availability of meaningful targets.

Excellent. Yeah, good answer. You know, specific to each industry, but but makes a. Lot, a lot of. Sense so I want to shift topics slightly into, you know, away from the the total of deal making in 2025 and and think about AI, right? It's a hot topic. We've got Richard here who who is dealing with with generative AI every single day. And I want to start with a question and I'd love to get an answer from each of you. And Richard, maybe we can start to you, how are you using, you know, AI or how are you seeing AI used within the deal making process, whether that's due diligence, sourcing, document review, whatever it might be, Where are you seeing AI come into play?

Yeah. I mean that's a great question. I will try not to give the half an hour long answer that I'm sure I could give. Really wanted to hear it. Look, I think a lot of funds are still sort of experimenting with different ways that they can take advantage of the tools. I think that the place where the, the, the sort of building block starting point is, you know, these tools are really good at summarizing documents, right? At searching and summarizing documents. That's like the most basic thing that you can do with this stuff.

And so I think many funds will do the basics, which is they have a ChatGPT enterprise subscription. They build some custom GPTS to automate specific workflows that they do a lot and they start to use those. So that could be next step. When I get a SIM, I have some tool, I have a custom GPTI put the SIM in it and it has, you know, the set of criteria, you know, the set of cuts that it does on a SIM that are for my funds specifically. And you know, the kinds of things that I care about. And then you know when I go to them and it will then prepare a set of management questions based on that SIM.

So when I have a first question conversation with management, I've got a draft already of what I'm going to go say to ask them about or you know, I can do a quick sort of red flag check on the SIM and if there's like a bunch of stuff in it that doesn't feel like it's a fit for my fund, I can just not go further and find another SIM, right. So like those are sort of the ways I think funds are using it today. I think where funds want to get to in the next year is a little more advanced. I think on sourcing, you know a lot of funds today they might look at.

20 deals before they decide there's one they want to go deeper on. And obviously that ratio vary a lot depending on who you are. But something like that. I think there's a question of like, well, does GenAI, I mean, we can make that instead of us spending a day on those 20 deals, we don't go forward with, could we spend like 3 hours, right? Or you know, half a day or like much less time, right? And so then does that mean we can look at 50 deals before we pick one to go and you're more like be more selective and like a higher percentage of deals that actually go through or higher percentage of deals that were, you know, that make it through IC and so forth?

Like I think that makes a lot of sense. I think that's a great use use case. And I you know, the most advanced funds are starting to build tools where you can type in a company and it will start checking in a bunch of against a bunch of things and and running some of. That analysis. And then I think the other piece is on the end of the, the journey of like how do we do, how do we make the, the sort of production process at the end of of a deal easier? So how do we start drafting components of the IC memo automatically summarizing all the different reports we get?

Can we respond to LP questionnaires in a more automated way? Because that can obviously be very tight and obviously is important. So that's the other aspect of like how can we sort of, you know, make some of those production challenges faster? I think those are, you know, and, and I think there's some progress on that as well. But again, I think most companies are still experimenting with custom GPTS and starting to use those and and starting to see some productivity gains. Great, great answer.

And yeah, I know I'm still wrapping my head around it and how I can use it in my life. So hopefully I'll get there and, and Henry for for you and deal making. Have you all brought AI into your process yet or is that something you're looking to do? Yeah. I mean, I think, you know, it's an extension to the tools and technology that we use for business development and, you know, growth from that perspective. I think, you know, you're starting to see much more proliferation in our industry as far as that's concerned, trying to kind of have, you know, you know, even kind of a little bit of predictive analytics as far as around certain profiles and how, you know, people with similar profiles and arcs in their career think about, you know, strategic alternatives.

And so it's a little bit of like, well, can we kind of get in front of that in a little bit and see, see where that's headed in order to try and anticipate. So it, it, it's getting there slowly but surely, you know, but I, I still think that there is some runway ahead of us to be able to really use it, you know, and implemented and kind of a meaningful, you know, way. But I, I, I think a lot of it is about data and, and, and the analytics around that and kind of taking advantage. Great.

And and Eric, how about in your space? Is there anywhere within the deal making process you're currently using AI or would like to? Yeah, I would, my sentiments are very much in mind with the previous answer, right. I think we're in the early innings of learning how to implement this most effectively for M&A. The the earliest applications that I've seen are using it to help through due diligence and to sift through larger data rooms, right, to speed up the process of going through some pretty mundane activities that need to be done. So we're we are leveraging AI to do that. That's the more basic and tactile frontier.

I think when you start looking at strategy, growth plans, etcetera, that might be something that's more of a future, you know, application for AI. Excellent. Makes makes a lot of sense, a lot of work to be done. And and Eric, since you're you're my Greg, your question and for for the audience, whoever wants to time in here, when you're looking at a target, for example, how are you weighing AI within that company? How are you viewing its risks and synergies to its business? You know if a company is using that heavily and how, how does that, what does AI fit into your selection criteria now?

Yeah. You know, currently I would say that that is not a critical component of our selection criteria. I do think that that's going to increase going forward, right? Because the more that companies even in, you know, sleepier sector like CPG are able to effectively leverage AI, it's going to allow them to be more efficient and more proactive in meeting consumer trends where they're going, right, which leads to innovation, which leads to the health of the business. So I think it's going to be of increasing importance. But today, I don't think that that's a major differentiator and M&A selection process.

Yeah, in in Richard. Well, that I would. Yeah, Come on. I. Was just going to tell me I was what I would say from the wealth management space on that one. It's exciting to kind of see, you know where, where, where the potential is. But I think on on kind of a fundamental basis, because it is a relationship driven industry inherently, you know, in some simple forms, for example, I know certain video tech platforms and stuff for being able to add kind of like an AI note taking component, for example.

And so you know, the great benefit there is, you know, everybody knows how how challenging it can be to be, you know, really engaged in communication or in a conversation with somebody while also taking the copious amount of notes. And so if you have that, that, that AI feature to be able to kind of hold your hand through that process, well, then you can effectively kill two birds with one stone. And chances are the AI note taker has done a lot better job than if you were to do it yourself, right? And so there are some kind of incremental added benefits that you're starting to see there.

I've also seen it in ways where certain, you know, platforms are using it to help kind of create ice breaker opportunities for you. When you're looking at somebody's bio where they can, you know, Venn diagram their respective bio with yours or vice versa. And kind of give you examples of ways in which that, you know, you can kind of have a deeper relationship, a deeper connection with those types of advisory firms. So. Interesting. Yeah, I know. I've benefited from that note taking as a as a salesperson many times, right.

And you can keep your eyes forward so you're not looking down at the pen you're typing and Richard from, from your lens. When you, when you're helping clients think about deals in, in AI, you know what, what type of risks does AI introduce into kind of the selection process or deal making process? Yeah. Well, I mean, sorry, do you mean in terms of like as you're thinking about an asset and you want to think about is Jen AI going to be a problem for this asset? So, yeah, happy to clarify.

What I'm thinking about is if you're thinking about an asset that you know, came to to purchase, right, and how is that company's exposure to AI, you know, how are you looking at from a diligence perspective, right? If companies are they, are they early, are they not adopting or are they heavily adopted, right? Where are the risks in that? Yeah. So, OK, again, I'll try to give the the a, a relatively short answer. You know, we have a criteria that we've developed at Bain, we've now used on about 1000 companies. So I mean, I think we feel like it works reasonably well.

The, the basic way we like to think about it is, you know, you start with is the thing that the company does something that GenAI, I can do pretty well, right? Like the classic example of this, of course, is like Chang, right, which is a company where like basically they're a function of at least the, the, the task they did of summarizing books for students who want to not read the books is now something that, you know, AI can do really well. I I think that for, you know, and, and so we don't see too many businesses like that. You know, maybe like 5% of business, we look at you, there's a real risk that GenAI, I can just do what the business does.

So we look then you want to think about, you know, sort of second level effects, right? So will AI enable new companies to enter the space and compete with them? Does that breakdown barriers that that can be things like, you know, companies I've looked at where their core strength is, you know, we've ingested tons of rules and regulations and things and, and we make it easy for people to understand those or query those like, well, GenAI, I can also do that pretty well, right? And so that that may not be a sustainable and advantage going forward or, you know, this, this, you know, we deal with super messy data and we had to build all these complicated algorithms to process it and deal with it.

And so that's our strength in life, you know, does that get easier right in that mode goes away, more people enter. So you want to think about that. You want to also just think about is GenAI I going to create meaningful productivity boosts, which can be good, obviously, if you're providing that, but also how does that change market dynamics? So like my favorite example is, you know, if you present, if you have software for lawyers, that's like hours tracking software, right? And you know, you're charging for seat. And then in the future, maybe law firms won't need as many paralegals because some of the work they've done gets they do get some by GenAI and I like your hours tracking business might be impaired because you can't sell as many seats.

Yeah, like that's, you know, you want to think about that, right? And what before that happens, right. And how you doing deal with it? So those kinds of issues. And then the plus side we look at, you know, can GenAI and I make the product better, right? Like is GenAI and I going to make it more valuable to more customers? Is GenAI and I going to enable you to enter new markets that you couldn't enter? Is it going to allow you to embed more deeply into systems, you know, do all the things that make products better?

If so, that's good. And then the last thing you want to think about is can Jenna I make your business more productive, right? If you have a big call center operation, you know, Jenna is going to be a big help. If you have a a lot of sales P, you know, you have a big inside sales team, GenAI, I can help, right? If you're of a lot of developers, you know, and so forth. And so are there big pools of knowledge work here at this target company where GenAI, I can make them more productive, right?

And usually that's going to be a good thing. Obviously, if you're pricing per hour, then you'll want to think about how that all plays out. But you know, that's that's sort of so those are sort of the, you know, quick rundown, the types of things to think about. As I say, only about 5 company, percent of companies we look at and say, Yikes. Most of the time we look at it and say, you know, there's probably some opportunity here from GenAI I that's real in the last two categories. But there may also be some new threats. And so this is probably an issue that should be of high salience to the executive team.

And if the executive team is paying close attention to it and working on it, you can feel good. And if they're not, then you may want to think about that if you do the deal. Yeah. OK. Thank you for that. So shifting out of the, the AI lens for for a moment here and I'm happy we covered that and covered it well. I want to get into and when we kicked off today, I mentioned 2024, there were geopolitical concerns, economic concerns, inflation, global tensions, you know, higher interest rates that were coming down.

I want to want to talk about a little bit about that right now, right? I think that's top of mind. New administrations, many elections happened in 2024. So Eric, I'll direct this to you first, right, how, how do you anticipate these geopolitical economic factors, right, that I've listed impacting deal making in 2025? Great question And I think that I would have 3 responses to that, right? One is obvious geopolitical tensions and a lot of the items in the news that are happening can can dramatically impact interest rates such drives all sorts of strategic channels, right?

But more drilling down one layer further than that very high level comment, I think the risk of tariffs is something that may actually become a driver of M&A, right, as we see the risk of these tariffs propping up all over the world. If you take my employer as an example, a business that imports and ships overseas enormous amounts of product all the time may be incentivized to onshore operations in certain countries, which could drive M&A through a strategic lens. And then the third piece is I suppose specific to the US, but you see it in Western Europe as well, right? New legislature or new ways of working around healthcare and labeling.

Transparency about composition of products is something that will link to my previous comments about needing to shift portfolios to more healthy products, which will lead to more M&A as well. So I view those as challenges, but outside of interest rates, I think they're actually challenges that are more likely to drive more M&A than less. Yeah. So challenges that can become opportunities in in certain ways. Excellent answer, answer. And Henry, how about Henry, how about yourself? Are you, how are you seeing these these factors playing to your role in 2025 in deal making in your space?

Yeah. I mean, I think, you know, again, there's always going to be buyer opportunity and I think what they'll do is they'll create the market and the deal structure and an environment for sellers that alleviate some of their concern around some of these risks inherently, right. And so you know, whether that's getting queued on the, on the deal structure aspects, but but also, you know, again, and I mentioned it earlier, it's a relationship driven industry, right? And so you know that the, the actual asset that that you're acquiring is the relationship between the advisor and the clients in my in in my world.

And so, you know, you have to ensure that there is peace of mind and, and you know that you're not disrupting the apple cart from that perspective. So you know, if, if there is you know, a, a level of concern because of certain tensions or, or, or events or geopolitical issues, you know that you have to be cognizant of that and you have to make sure that you're handling in the right way. Because I think, I think, you know, the, the M&A that that that occurs in this industry is, you know, it, it's a lot of a lift. It's and there's a lot of misconception that it's just kind of like, you know, oh, we'll just mindlessly have great assets and kind of bolt on here and there.

But I think a lot of the work is done, you know, after the acquisition is consummated, right, where with the integration and the transition and ensuring that, you know, you can try and enhance and optimize the client experience for those advisors. So, you know, I think you have to be cognizant all up and down from that perspective. And I think there's a lot of inconsistencies in the market right now in general, you know, and so, you know, it's it's kind of everybody's guess as far as where inflation is going to go, you know, GDP forecasts, geopolitical events, etcetera. So yeah, it's, but I, I think the M&A in Myspace will continue to soldier on pretty opportunistically nonetheless, I think a lot we lost your audio though.

That folks, one day I want to piggyback off your answer there quickly and hopefully you know, it is about integration, right? Do you see any of these factors playing, you know, to get the deal done? Maybe there's there they play a role, right. But with integration, is there anything that these factors impact, you know, in your industry? As far as what specifically? Just curious, right, if you, when you, I guess when you look at integration, right, oftentimes we talked about getting the deal done, but I, I've, you know, being in this business a little while, we forget about integration sometimes, right?

Deals done, we, we, you know, certain parties wipe their hands, they move on to the next one. I guess I'll rephrase this. What, what risks with an integration do you see in 2025? Is there anything new that you all are looking out for? Right. And I know you're specific on your industry relationships really matter. Is there anything in terms of risks that are have come about in the last 12 months or you're looking? Forward to.

You know, I think for us specifically in my firm, you know we're pretty qualitatively driven. So I think as as long as we retain that focus, you know, and, and, and you know, I think tamper and, and ensure that we don't kind of get too far out of our skis and really kind of focus on making sure that that integration is solid and that our new partners are, you know, invigorated and excited for this prospect. And a lot of that comes through how, you know, their clients are reacting to it, right? And so, you know, I think that that's a big driving force for us.

We're always very cognizant of our culture and the alignment and how we think about it from that perspective. And we don't want to compromise that. So I think if we can continue to ensure that that's our North Star, then, you know, I don't think we, we, we just, you know, one thing I will say though, is about integration is, is we, we learn every single successive acquisition about something. And you know, and, and as my dad likes to say, you aim for a high average. And so we hope that, you know, you, you, you, you come across things that can improve the process, can improve the approach and the structure.

And so, you know, for us it's a matter of not being some sort of arcane institution that's set in their ways, but but rather being kind of flexible and adaptable to, you know, kind of new methodologies, etcetera. Makes makes kind of sense, right? Learning a little piece incrementally each time you, you get, get a deal done and integrate makes a lot of sense. Add it, add it to the playbook for next time. Piggybacking off of of geopolitical concerns, right, Being more specific on public markets, Eric, I want to want to throw a question your way around this, right? We've seen IP OS in the public market kind of come, come back, you know, a little bit, right, but be relatively frozen.

Do you anticipate, you know, seeing more companies go public in 2025, and if so, why? Yeah, it's a, it's a good question. I, I do think the answer is yes. I think you will see more going public, but perhaps not by a dramatic degree. But I'm, I'm saying that based on a little bit of a backlog, right, of people trying to to capture the right moment for valuations. And I think that there's good macroeconomic considerations to have waited perhaps last year and to believe that the conditions won't get materially better from more or less the current state going forward.

So I think that that creates a pocket of opportunity that will likely create a little bit of a pop in new listings. But I, I, I don't have much confidence in the degree right to which that would be true, but I do think that it will directionally be. Yeah, OK. Yeah, I'd have to agree with that, right. Will it go, will there be this massive spike, but will go up and not, you know, massive spike. So shifting to the the the private market then, right. And and I'll ask this, you know, Eric, maybe we can answer this first is in, in sector specific, you know, how often are you all sourcing deals from, you know, sponsored backs companies or looking at sponsored back companies?

Is that an Ave. that you're going down often or are you keeping a wide map? Yeah, No, our, our deal flow is very robust. I think that it it falls very much in line with what I was outlining in terms of the competitive dynamics of the space. We're seeing a lot smaller or medium sized businesses that are trying to capture that right time to sell in terms of macroeconomic conditions, also sector conditions right for confectionery and sweet packaged food. So we, we have a ton of activity and we're actually buying things worldwide at a pretty fast clip to the point that it becomes like an integration challenge.

So I, I think that our piece of the sector is going to be very active this year, right? And I think many of the people on this call have also seen that that rebalancing is not, it might be primarily in terms of volume and the small to midcap acquisitions, but not entirely, right. You have the, the Cala Nova work, there's been discussion in the, in the news about Hershey potentially looking at a sale. So, you know, I, I think that there is a ton of interest in aggressively trying to rebalance and capture market share given the current conditions in the market. OK.

And, and Richard, I'll post this question to you, right 'cause I know in your role you're working heavily with private equity data, right? How are, how are, how are those sponsors viewing the market right now? We hear a lot about pent up, pent up sale demand, right? You know, there's companies being held for a long time X amount of percentage of, you know, private equity firms have held to length essentially. What are you seeing in that space and what's the word on the street? Yeah.

I mean there's definitely, you know plenty of dry powder. So there are is plenty of money that funds want to put to work. As you say, there are also plenty of assets that are at the point in their life cycle where they probably want to trade them. So in that sense, you have the ingredients for a robust steel market. I think the only real overhang is the interest rates because even as interest rates are lower now than they were, they're still higher than they were when they bought those assets, right? And so you need to be able to in order to get a deal done right, you need to have every, you know, things have to work out in terms of where the assets are.

And so, you know, I think what we saw last year's, we saw a lot of, you know, A assets come to market, right? And we saw that there's a lot of opportunity to get deals done around A assets. I think the question is as that, you know, the B assets come to come to market, you know what will there be as can they get the market done for that? I'm optimistic and I think most of the people I talked to are as well. I think most people are at least cautiously optimistic that, you know, the right ingredients exist for a frothier deal market this year.

I think, you know, it's, it's still just a little bit hard early to tell. And so I don't, I don't want to on a video with 100 people watching, make a bold Super Bowl prediction about about it. But it certainly feels like we're going to get a lot of, you know, yeah, I mean, it feels like there's a lot of deals that need to get done in this market. And so I I hope they won't be this year. And I feel like they should be. And I think, again, I think if you ask the investors, they want to make them happen.

They just have to make it to happen, right? And everybody wants it. Yeah, yeah, yeah, right. Everyone wants it. We just need the right ingredients to to get it right in the start to line for things to come together. So we're about at at 4045 minutes here. We have a couple questions in the in the chat and you know, to the audience, if there's anything we, you guys, you you want asked, feel free to type that into the into the chat and we can, we can, we can ask that, right.

So I'll direct, we'll take a couple of these and I'll direct them towards, you know who they're supposed to go to. So Eric, you had one come in, right? And it's about, you've mentioned this a few times or or kind of teased it right around how might you know cocoa prices impact your strategic M&A strategy this year? Great question. Definitely something that's very much top of mind for us, right, as well as anybody else in the space. So there's a number of things that you can do to try to mitigate that risk right, outside of M&A. You can reformulate products, you can try to rebalance when you sell into the customers to lower your exposure.

You can try to R&D your way out of it in the future. But none of those are as effective as rebalancing the portfolio itself, right, which you can do most effectively and fastest through M&A. So that is absolutely something that is high on the agenda to look at. How can we lower that exposure. And again, you know you can enter new categories, you can look at companies that operate within the confectionery space, but with a lower cocoa content. And those are strategic imperatives that we have and that anyone in that space is going to have to try to protect the shape of the PNL.

Given that cocoa prices have increased 4 to 6X in the past couple years, it's really been a seismic change. So good, good question and one that M&A can certainly help address. Yeah. OK. Well, thank you for that answer. So Richard, you had a question from the audience here around your attendance at an upcoming conference and it's around really, you know, what type of technologies do you see in the market, right and what type of AI technologies are exciting to you within deal making? Yeah, it's a great question and thanks Luke for for asking it.

I will be back at Deal Max in a couple of months. So if you want to hang out feel and you're in Vegas and in April, feel free to feel free to let me know. Yeah. So it's an interesting question. And you know, so there are a lot of tools out there. I've played around personally with a lot of them. I think many of them are not fully ready for prime time. I think this set of technologies that I feel is the most mature for investors is the sort of knowledge management tools, research tools where you can point them at your corpus of documents of deals you've worked on, you know, final presentations from consulting firms and other other parties, as well as IC memos, etcetera.

And be able to search them and get, you know, pretty decent answers out of them. Or as well as new content of like I have a new data room, like take a look at this. There's, there's progress, you know, happening in these spaces. I think the couple of names, I'll just throw out a few names there that are, you know, popular, like Rogo, blue Flame, Sauna heavy. Those are some of the big names in that space that I think have have done, you know that are making progress and launching, making a lot of updates and are sort of targeting investors with investor centric products. Obviously if you grab me a beer, grab a beer with me in Vegas, I can give you I can give you more detail on specifics, but that that's kind of what what we're seeing.

But and again, I'm working, we're working with funds closely that are implementing these. I think they're seeing them work pretty well. I think that they require some customization to truly get to a point where they can really accelerate productivity, but they're good enough that it's time to start playing with them. So I think if you're a fund and you're listening and you haven't started investigating those, I I think that's probably like a very good concrete place to start, you know, just to give a, you know, a place that something specific to go do anyway. Yeah, I know a lot of a lot of good names there, big ones in in the in the space as well.

So there's, there's one more question with within the in the chat here and it's around valuation. So I'll open this up to the group if anyone feels inclined to answer. It's just about how much more room is there to grow with valuations, right? And is, does this impact just the private markets or or does it also impact the public markets? Does anyone want to take this one? I mean, I can attempt to answer it. It's a very hard question, right? I mean, I, I, I think what you know, so I, I think with valuations, you know, at least on the private market side, I can speak to that.

It's public markets are harder. I mean, if we could all predict public markets, well, we wouldn't have, we wouldn't be sitting on webinars, we'd be all sitting in, you know, on our mansions, right. So it's hard to predict, but private markets, I think you know, if you look at what's driven valuations historically, it's been a combination of an actual realized value, right? It's been a combination of multiple expansion and top line growth and then there's been a dream of getting a lot of margin improvement and that's been underwritten in a lot of deals. But historically that actually hasn't been realized as as effectively as people would like.

And it's not that obviously PE firms are very good at cutting costs, but what often happens is they successfully cut costs in one area and then it turns out more investment is required in IT or in some other area and that offset some of the benefits that they thought they'd get. So I think going forward, if we want to see valuations, you know, sustained, we we need to believe, I think that you're going to get more of that margin expand that that that the margin improvement stuff is going to be real in the next time around. Because I think multiple expansion is going to be hard to get given interest unless interest rates come down meaningfully in the next few years.

And so it means you've got to believe you can actually deliver on some of the cost cutting opportunities. Now, of course, the good news is we now have AI, right? So we actually now have a huge new buzz saw that we can take to to cost cutting that didn't exist a few years ago that actually makes it plausible that you could find cost cutting opportunities that, you know, truly didn't exist during the previous ownership. So I think there's an opportunity to sustain at least current levels of valuation in PE on that basis of like thinking about real margin improvements being possible and so forth.

But you know, I think that's kind of that. You know, I think I don't see multiple. I certainly don't see valuations dramatic, you know, at a multiple basis going up dramatically in the next, you know, year or two. And except in maybe specific cases where there's, you know, a lot of buzzing around like, you know, talking about foundational models or something AI. Bill, I think I think GDP forecasts kind of show this kind of robust economic environment backdrop, right? And so while evaluations I think are stretched and a little expensive, I think they're of higher quality and certainly Max 7 makes up a lot of that.

But you know, those guys in and of themselves have pretty strong ROIs. So, you know, I think it's a matter of how you think about it. There's also somewhat of a normalizing yield curve at this point. So, you know, it's again, I mentioned inconsistencies in the market right now, but but yeah, so you know, when you do find that crystal ball though, whether it's Richard or Graham, let me let me know. Yeah, you can say it's a tricky question. Everyone's searching for the answer, right. So in both, both markets, you know, one more question just came in and Richard and for anyone, if anyone has experience with this, but it's around AI specific, if there any, any type of tools for web scraping right for and I'm not quite sure what the use case is right, but for lower middle market firms to scrape the web for maybe information or sourcing of companies and deals.

Yeah, it's a great question. So, you know, I wish I had like a fantastic answer for you and being we ended up buying a web scraping firm a few years ago and we've now grown or we had grown it quite a bit. And so we've just basically built our own web scraping set of tools because we we found that we couldn't find a commercial solution that was willing to work with us. And we do a ton of web scraping. I don't think that means you have to do that, but I'm just saying that's unfortunately my experience. What, what I will say is I'm, I'm personally very excited about Operator and what that implies for future web scraping.

So Operator is a new tool from opening eye that they just released a week ago. I don't know, I'm not sure if any of you read my sub stack, but I have a sub stack called Artificial Investment, which I write about and I had an article about Operator last week. So you're welcome to check that out if you want to read more. But the basic idea of Operator is it can, you can give it a task and it will go to a website and just do that task for you. Now today it doesn't it this version one, it doesn't quite work well enough, I think, Michael, to like handle all your web scraping needs, but it could do some of it.

But I think that like operator 2.0 will probably be able to do a lot of that web scraping stuff for you really easily. Like you'll just be able to tell it, go to this website and pull this information for me and it'll just kind of do it right. So I think that there's a lot of potential excitement there. You know, if you, you know, Michael, if you send me an e-mail, I'm happy to like trying to think about, you know, ask my web scraping team for some specific recommendations to get back to you because I don't have any names on the top of my head.

Yeah. Well, thank you, Richard. So we're about you know at time here. So just want to thank the three of you, Richard, Henry, Eric for for a great panel today. We've covered a lot of information, you know about 2024, what we're looking forward to in 2025, the future of deal making. We got industry specific in certain ways. We tackled a bit of AI, which is always a, you know, a tall order. What a really great conversation. So thank you to the three of you for for joining us today for such a great panel.

Thank you to the audience for for joining us. And we look forward to seeing you again on another webinar and have a great day. Thanks everyone. Thanks everyone. Bye.