00:00:08:19 - 00:00:10:00 Welcome to M&A Corner. 00:00:10:06 - 00:00:11:12 I'm delighted to be joined by 00:00:11:12 - 00:00:13:09 Stephen Amdur of Pillsbury, 00:00:13:09 - 00:00:15:03 one of the largest law firms in the world, 00:00:15:03 - 00:00:16:07 who happens to head their 00:00:16:07 - 00:00:17:19 global M&A practice as well as 00:00:17:19 - 00:00:19:03 their private equity practice. 00:00:19:15 - 00:00:20:18 Stephen, welcome to M&A Corner. 00:00:21:00 - 00:00:21:13 Thank you, Kevin. 00:00:21:13 - 00:00:22:02 Happy to be here. 00:00:22:03 - 00:00:23:10 I want to talk a little bit about 00:00:23:10 - 00:00:24:14 the general environment 00:00:24:14 - 00:00:25:14 -Sure. -for M&A, 00:00:25:14 - 00:00:27:13 and then we can talk more specifically about things that 00:00:27:13 - 00:00:30:06 I know you're particularly focused on with your practice. 00:00:30:06 - 00:00:32:11 Clearly, it's an interesting environment 00:00:32:11 - 00:00:33:14 from an M&A perspective. 00:00:33:14 - 00:00:36:18 It's constantly changing, constantly evolving. 00:00:37:11 - 00:00:39:22 What are you seeing from boardrooms, 00:00:39:22 - 00:00:42:14 from private equity sponsors who you're advising 00:00:42:14 - 00:00:44:20 in terms of how they're approaching such an 00:00:44:20 - 00:00:45:21 interesting market? 00:00:46:10 - 00:00:51:16 I've always found that when clients have certainty or confidence about 00:00:51:16 - 00:00:54:04 which way the market's going, whether up or down. 00:00:54:04 - 00:00:55:23 It drives them to take actions. 00:00:56:11 - 00:01:00:06 It drives them to be acquisitive, to find opportunities to pursue. 00:01:00:14 - 00:01:06:07 It drives them to recalibrate, restructure, take actions, dispose of divisions, or even do a sale 00:01:06:07 - 00:01:08:11 if they think things aren't going the right way. 00:01:08:19 - 00:01:14:09 I think what we've had over the past couple of years is a lot of uncertainty that's really compressed the marketplace. 00:01:14:09 - 00:01:18:19 You've had a lot of clients who just aren't sure whether things are good or bad or otherwise, 00:01:18:19 - 00:01:22:22 and you've seen that result in sponsors holding on to assets longer. 00:01:22:22 - 00:01:27:10 You've seen it result in large corporates being less interested in doing transactions, 00:01:27:10 - 00:01:29:15 both for marketplace reasons and regulatory reasons. 00:01:30:07 - 00:01:38:00 I think what we've seen in the past couple of months is people have developed a greater degree of confidence and certainty 00:01:38:00 - 00:01:42:14 about where things are going and are much more interested in actually moving to transact. 00:01:42:14 - 00:01:50:08 And so, the last 60 days have been about as busy as we've ever been as clients are really taking the opportunities to 00:01:50:08 - 00:01:55:12 move on transactions, to bring things to market, to move forward with deals because 00:01:55:12 - 00:01:59:17 they believe they finally have an understanding of where the marketplace is, where the levels are at, 00:01:59:17 - 00:02:00:20 and now they're ready to move. 00:02:01:00 - 00:02:02:01 Yeah, I couldn't agree more. 00:02:02:06 - 00:02:06:17 I mean, you sometimes need to upset the chessboard and have the pieces move around 00:02:06:17 - 00:02:11:05 for people to revisit their strategic priorities and what they should be doing from an M&A perspective, 00:02:11:05 - 00:02:16:16 but when it is so uncertain, it's very hard to initiate those transactions, and that market environment, 00:02:16:16 - 00:02:19:17 clearly after Liberation Day, has been somewhat unsettled. 00:02:19:17 - 00:02:21:21 But the way I'm seeing it and the way our clients 00:02:21:21 - 00:02:24:14 seem to be approaching it is that people are just getting used 00:02:24:14 - 00:02:27:06 to the temperature of the water, and it's going back and saying, 00:02:27:06 - 00:02:29:01 okay, it’s a little bit unsettling 00:02:29:01 - 00:02:32:06 from Inauguration Day to Liberation Day and beyond, 00:02:32:06 - 00:02:35:05 but people are starting to get used to this environment 00:02:35:05 - 00:02:38:00 and able to hopefully be able to transact through that. 00:02:38:00 - 00:02:45:15 In terms of how you price a transaction in an environment that is so choppy, whether it's public equity or private companies 00:02:45:15 - 00:02:47:09 that are looking to bridge valuation gaps. 00:02:47:09 - 00:02:51:08 Have you seen anything new in terms of technology that people have employed? 00:02:51:14 - 00:02:55:23 I think we've seen a lot of people just get more comfortable with where the levels are at now. 00:02:55:23 - 00:02:59:09 I think after a number of years of real 00:02:59:09 - 00:03:02:23 dislocation from those heights of 2020 and 2021, 00:03:02:23 - 00:03:05:21 I think now we're finally seeing people get comfortable 00:03:05:21 - 00:03:07:05 with where the new levels are at, 00:03:07:05 - 00:03:10:14 and maybe it's not on the hyper-upward trajectory 00:03:10:14 - 00:03:13:04 that they were on in 2020 and 2021, 00:03:13:04 - 00:03:15:09 but people are getting more comfortable with, 00:03:15:09 - 00:03:17:08 sort of, where the market has reset to, 00:03:17:08 - 00:03:17:13 sort of, where the market has reset to, 00:03:17:13 - 00:03:20:06 and I think if you've got that level of confidence 00:03:20:06 - 00:03:23:00 of this is an acceptable valuation 00:03:23:00 - 00:03:26:07 because you're no longer comparing it to 00:03:26:07 - 00:03:28:15 unrealistic levels that were set 00:03:28:15 - 00:03:30:14 at interest rate environments 00:03:30:14 - 00:03:33:01 that just, you know, are not the norm anymore. 00:03:33:01 - 00:03:37:06 Now you're seeing people who are a little more comfortable making a move, getting the returns, 00:03:37:06 - 00:03:43:05 distributing capital out to their investors, and moving on to the next deal as opposed to holding on and waiting for 00:03:43:05 - 00:03:44:21 a sunny day that's just not coming around any time soon. 00:03:45:06 - 00:03:50:14 Right. Or trying to hold on to at least some of the equity in an asset in a transaction. 00:03:50:14 - 00:03:57:08 So while it might be not a traditional earn-out, we're seeing revisiting of majority transactions where maybe the seller 00:03:57:08 - 00:04:01:08 takes a minority and is able to potentially realize some upside in the future. 00:04:01:18 - 00:04:06:04 I think we were seeing a bit more of that over the past couple of years. 00:04:06:04 - 00:04:12:23 It seems like people are maybe potentially moving on to full-sale transactions again, right? 00:04:12:23 - 00:04:17:20 That we're seeing more traditional M&A transactions coming to market 00:04:17:20 - 00:04:21:14 now than maybe there had been for a couple of years where 00:04:21:14 - 00:04:27:02 I think that real dislocation was a concern, that they were buying or selling at just the real wrong time, 00:04:27:02 - 00:04:31:17 and they wanted to hold on to a piece so that they were better positioned for when things bounced back. 00:04:31:20 - 00:04:35:04 The good news is, as the activity levels do pick up, 00:04:35:04 - 00:04:40:23 there does seem to be a more receptive regulatory environment for people to transact within. 00:04:40:23 - 00:04:44:08 So whether that's the FTC or the DOJ, which people tend to focus on, 00:04:44:08 - 00:04:50:02 or some of the other regulatory agencies, including the FCC, which is really changing the entire media landscape 00:04:50:02 - 00:04:55:10 with people able to do transactions that they were fundamentally not able to do under the prior administration. 00:04:55:10 - 00:04:59:02 So it does feel like once we do get through that period of uncertainty, 00:04:59:02 - 00:05:01:11 people do get used to the temperature of the water 00:05:01:11 - 00:05:03:09 and begin to transact, 00:05:03:09 - 00:05:08:00 those should be able to be consummated in a way that they haven't been, perhaps, over the last few years. 00:05:08:08 - 00:05:09:15 I think that's 100% right. 00:05:09:15 - 00:05:17:01 I think the last administration, you saw a lot of, again, uncertainty being created 00:05:17:01 - 00:05:22:01 by an unwillingness to give clear guidance about certain matters. 00:05:22:01 - 00:05:27:21 There was obviously a heightened focus on big tech, which I think the current administration continues to maintain, 00:05:27:21 - 00:05:32:16 but there was a broader suite of transactions that— 00:05:32:16 - 00:05:37:12 It was just unclear whether or not these deals would be approved, would they be blocked, 00:05:37:12 - 00:05:41:15 and I think that level of uncertainty really drove people away from the table. 00:05:41:15 - 00:05:43:12 I think, again, this administration, 00:05:43:12 - 00:05:45:09 while clearly having its own priorities 00:05:45:09 - 00:05:47:22 about what deals it will and will not support, 00:05:47:22 - 00:05:51:13 while clearly having a broader perspective 00:05:51:13 - 00:05:55:04 on acceptable and unacceptable transactions 00:05:55:04 - 00:05:56:10 in the global regime. 00:05:56:10 - 00:05:58:10 This administration seems more willing 00:05:58:10 - 00:05:59:10 to give guidance, 00:05:59:10 - 00:06:03:05 to be communicative with regulatory lawyers, 00:06:03:05 - 00:06:05:04 and give guidance on transactions 00:06:05:04 - 00:06:07:06 so that you know this deal can work, 00:06:07:06 - 00:06:08:10 this deal won't work, 00:06:08:10 - 00:06:11:05 and you can start having those conversations 00:06:11:05 - 00:06:13:04 earlier on in the process, 00:06:13:04 - 00:06:14:17 take them into account when structuring 00:06:14:17 - 00:06:16:00 and considering a transaction 00:06:16:00 - 00:06:17:13 and really find a way to move forward 00:06:17:13 - 00:06:19:08 or not move forward, as the case may be. 00:06:19:10 - 00:06:25:01 It's actually very interesting because a lot of people don't understand that you can actually interact with regulators 00:06:25:01 - 00:06:30:05 in advance of a transaction and utilize that input to actually structure something that makes sense 00:06:30:05 - 00:06:32:08 both for the parties and for the government. 00:06:32:08 - 00:06:37:00 Even with agencies like CFIUS, where you wouldn't normally think that was an option. 00:06:37:00 - 00:06:43:18 CFIUS will be the first to tell you that we are here to help you, not to harm you, and to slow down your transaction. 00:06:43:18 - 00:06:45:12 So it's actually a really interesting point. 00:06:45:12 - 00:06:49:16 Obviously you have to have the right people in the right places to have those conversations, 00:06:49:16 - 00:06:54:05 which obviously Pillsbury does, but it is a very important element of how you actually negotiate 00:06:54:05 - 00:06:55:18 and consummate a transaction. 00:06:55:18 - 00:06:57:03 Can we talk a little bit about Delaware? 00:06:57:07 - 00:06:58:10 We can absolutely talk about Delaware. 00:06:58:15 - 00:07:00:03 We can absolutely talk about Delaware. 00:07:00:03 - 00:07:01:21 It has been in the news recently. 00:07:01:21 - 00:07:06:10 For many years, Delaware was the state of choice for incorporation for a number of reasons. 00:07:06:10 - 00:07:10:23 Obviously it had very clear law, it had a chancery court that was effectively designed 00:07:10:23 - 00:07:16:02 to help resolve corporate issues and disputes in a very efficient manner up until very recently. 00:07:16:02 - 00:07:20:13 And a lot of the focus has been around controlled companies, whether it's Tesla or others, 00:07:20:13 - 00:07:24:17 where there's been outcomes that at least people in the deal community have questioned. 00:07:24:17 - 00:07:31:06 As a result, Delaware's changed its statutes, and in fact we actually worked on the Skechers transaction 00:07:31:06 - 00:07:32:18 as a sell-side advisor to the company, and as a controlled company, we were able to take advantage of a 00:07:32:18 - 00:07:37:06 as a sell-side advisor to the company, and as a controlled company, we were able to take advantage of a 00:07:37:06 - 00:07:41:18 streamlined process that Delaware allowed corporations to pursue. 00:07:41:18 - 00:07:46:13 It didn't fundamentally change the nature of the transaction or the standard of review of the board of directors, 00:07:46:13 - 00:07:50:11 which was obviously very high, but it did remove some of the technicalities 00:07:50:11 - 00:07:52:16 that would otherwise come into play in Delaware. 00:07:52:16 - 00:07:59:12 How are you seeing your clients think about Delaware now as a home for their incorporation? 00:07:59:12 - 00:08:05:13 Are they reconsidering it, or do things like what they've done in terms of changing the statutes move it back into a direction 00:08:05:13 - 00:08:08:19 where it is fundamentally a good place for corporations to be? 00:08:09:03 - 00:08:14:20 Obviously the state of Delaware has had a very long history as the state of choice for corporate incorporation, 00:08:14:20 - 00:08:17:09 and I think there's a lot of very good reasons for that. 00:08:17:09 - 00:08:20:23 We've seen for many, many years that the Delaware Chancery Courts 00:08:20:23 - 00:08:26:18 and the sophistication that they provide in their review gives a lot of certainty and guidance to deal professionals 00:08:26:18 - 00:08:32:15 in knowing how deals will be reviewed, how they'll be considered, what you can and cannot do. 00:08:32:15 - 00:08:34:09 I think the state has shown a willingness 00:08:34:09 - 00:08:36:16 both at the legislative and judicial level 00:08:36:16 - 00:08:40:12 to be pragmatic about the realities of changing corporate times, 00:08:40:12 - 00:08:44:00 and the most recent round of legislative modifications 00:08:44:00 - 00:08:45:19 I think is evidence of exactly that, 00:08:45:19 - 00:08:50:05 of a desire to make and keep Delaware as the state 00:08:50:05 - 00:08:53:07 where companies can incorporate in, 00:08:53:07 - 00:08:55:08 govern themselves, go public, 00:08:55:08 - 00:08:59:14 live a long and successful career and life as a public entity, 00:08:59:14 - 00:09:03:20 and understand the way their actions will be reviewed, 00:09:03:20 - 00:09:06:16 work with sophisticated outside counsel and inside counsel 00:09:06:16 - 00:09:09:08 to understand what they can and cannot do 00:09:09:08 - 00:09:12:17 and have good guidance so that they can operate 00:09:12:17 - 00:09:13:19 to the best of their ability. 00:09:13:22 - 00:09:14:18 Yeah, I couldn't agree more.