Continuing my attempt to pay it forward by sharing interesting reads (and listens) including my own “Cryan Out Loud” thoughts, here are my additions for the past week.??
As a reminder (1) some of these may be old references. I just happened to get to them this week (2) apologies, but some may be behind pay walls (3) I consider audiobooks “reads” (I know that can be triggering to some folks…) and (4) always welcome constructive feedback, comments, or suggestions for things I missed.?
Interesting Reads:?
- The End of Competitive Advantage by Rita Gunther McGrath Link to Barnes & Noble??
- Cryan Out Loud [COL]: A very well written strategy book. Tend to agree with a lot of her key points around how rapid change makes the idea of a “sustainable competitive advantage” outdated. Strategy today requires much more flexibility and dynamism. Curious if her thoughts on resource allocation and scale (less beneficial in her view) hold up over time given what is happening in “big tech” and the sheer size/scale of their investment budgets and the “moats” they continue to build. Her table around resource allocation (P.77) caught my attention, the “from to” includes:?
- “resources held hostage in business units” to “resources under central governance mechanism”?
- “Terminal value” to “asset debt”??
- “Build it yourself to leverage external resources”?
- COL: Agree with the theory that activist “sell yourself” campaigns will pick up with the overall M&A market. It was interesting to see in our own data that 2022 and 2023 were very “active activist years” despite the low M&A volumes. Activists proved their “all weather” chops?
- COL: Always find it surprising how strong director support is (95% for Russell 3000 companies based on the above). It is hard to think of other things that 95% of people would agree on???
- COL: It is the time of the year for mid-year assessments apparently. This is an impressive body of work; I found my self agreeing with a lot of it. Couple observations (a) Thought the point they made about “Public Company Buyouts of Themselves” was interesting (around aggressive buyback programs) but disagree with using the home building sector as the example here (don’t have the same M&A and ROIC opportunities as many other sectors). (b) Liked the key theme of Buying complexity, Selling Simplicity in the Equity markets (agree we’ll see more divestments in Japan). (c) seems a little more cautious on Direct Lending (which is a consistent theme this week) and (d) hadn’t really thought about it in this way but piqued curiosity when they say small cap indices have “degraded” as private markets have grown??
- A buyout gone wrong creates fireworks in the private credit market [Financial Times] Link to Article??
- COL:? All is fair in love, war and credit agreements??
- Pressure mounts on senior bankers as discontent in junior ranks simmers [Financial Times] Link to Article??
- COL: This one hit home. Sunjeet makes a point I’ve said many times “Big revenue producers are horrible managers,” he said.?“It is a real problem. Empathy, listening skills, lot of those folks don’t have it.”?
- Premiera’s last-minute decision to kill the Golden Goose IPO? Link to Article???
- COL: Interesting given the recent articles about the IPO markets improving, will see if this is one-off misstep/Permira specific or if it’s a sign of strain in the markets overall??
- COL: Surprised Dividend Recaps are hitting record rates. Certainly an “easy” way to create some liquidity (but far from a full exit) and what does this say about the current interest rate/credit environment???
- COL: Glad to see these senior practitioners from Alix Partners talking about Revenue synergies which are extremely valuable yet rarely valued (modeled) and are often left as the “buffer”?
- This Judge Made Houston the Top Bankruptcy Court. Then he Helped his Girlfriend Cash In [WSJ]? Link to Article??
- COL: Admit that I’ve been following this story like a corporate finance/law soap opera.??
- Midsize Companies Are Big Business for Wall Street’s Megabanks [WSJ] Link to Article?
- COL: Impressive to see how well JPM has done capturing this business that blends commercial and investment banking business. I suppose if you believe the KKR Outlook report that more high-quality companies are staying private longer (majority of them “mid-sized” the strategy here makes perfect sense?
- Pensions Piled into Private Equity. Now They Can’t get Out [WSJ] Link to Article?
- COL: Continues the theme running all year so far about PE payouts drying up (“California’s worker pension, the nation’s largest will be paying more money into its private-equity portfolio than it receives from those investments for eight years in a row”)??
- Calpers to invest more than $30Bn in private markets [Financial Times] Link to Article?
- COL: Seems inconsistent with the above??
Podcast Episodes??
- The Memo by Howard Marks: Bonus Episode “In Good Company”?
- COL: As soon as a memo or podcast comes out with Howard Marks I stop and read (listen) immediately. This interview is a good primer on his investing style/background. He references Annie Dukes book thinking in bets (which is also great by the way Link to Barnes & Noble). Her book was the first time I had heard the term “resulting” meaning if you get a good outcome, you assume you made a good decision (and vice versa) but that’s not always true. Howard also doesn’t believe in macro forecasts (or at least says you can’t invest client’s money behind them) which is interesting given all the mid-year forecasts coming out.?
- Welcome to the Arena by ICR: Charles Baker, Sidley Austin??
- COL: Really interesting discussion about drivers and themes of investing across the sports and entertainment landscape. (pretty impressive that Charles’ first legal assignment was the RJR Nabisco buyout!)?
- Goldman Sachs Exchanges: 2024 midyear outlook?
- COL: Liked the analytical evidence to suggest that the market valuation while high isn’t out of the realm of normal if you consider the profitability (ROE) about 3.30 minutes into the episode. That of course assumes the ROE is sustainable in the face of inflation and rising rates. Similar to the KKR reading above overall supportive of the environment but interesting to see GS favors equities over credit while KKR was inverse.??
- M&A Science Episode 302: How to Make AI Practical in M&A?
- COL: A nice intro to where AI is headed in the M&A space but think they also do a nice job of separating where we are today vs. where we could be in the future. There is no doubt to me that AI will improve many areas of the M&A process, but you’ll still need human practitioners in the loop.?
