Week Ending: June 29, 2024

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:

·        Transdigm Group Investor Day Link to Company IR Website

o   Cryan Out Loud [COL]: Transdigm (NYSE: TDG) a ~$75Bn market cap aerospace and defense company held an analyst day on June 26th. The presentation (and transcript) is worth a read because they’re just so different than the typical public company. TDG is clearly proud of their differentiation when it comes to management style, culture, capital allocation and capital structure (reminds me a bit of the Mitch Rawls/Danaher podcast I posted a few weeks ago).

·        US drives rebound in global M&A deals [Financial Times] Link to Article

o   COL:  Large M&A deals have driven volumes higher even though the pace (# of deals) is slower but no question the M&A market is improving. It’s also an interesting statement on CEO confidence (which has ticked up slowly). Doing a very large transformational deal requires confidence from the board down so it is good to see these large deals happening.  The data captured in the WSJ IB Scorecard is also a helpful resource on global activity Link to WSJ IB Scorecard

·        The Return of the Strategic Buyer in Tech M&A Jefferies Board Intelligence Link to Article  

o   COL:  Have said for a while that well capitalized strategics have (or at least had) a strong advantage in the current environment. Some good tips in here for potential sellers.

·        4 Solid Strategies to boost enterprise value amid economic uncertainty by Truist  Link to Article

o   COL: A simple but good summary (like “Make M&A deals that would impress investors in particular”) and agree with John Pilant’s point of view that it’s difficult to look at (certainly the recent) past to map the current environment because the (recent past) is so different (see comments from Howard Marks in the Oaktree roundup below on that). And his point that M&A deals done in times of uncertainty tend to perform the best is consistent with my own work/research.

·        2024 Mid-Year Outlook: An Unstable Economic Equilibrium by Torsten Solok Apollo Chief Economist Link to Article

o   COL: Continues the mid-year outlook theme from last week. This one feels a little more balanced and the certainty with which he states, “it is quite clear that a default cycle has started” (exhibit 8 in the document) is certainly a trend worth watching.

·        The Roundup: Top Takeaways from Oaktree Conference 2024 Link to Article

o   COL: As mentioned last week if Howard Marks/Oaktree puts out a piece it’s a must read for me. Headlines that caught my attention are “we believe we could be on the precipice of one of the most significant real estate distressed investment cycles of the last 40 years” and the discussion about “special situations” which largely corroborates the view in the Apollo article above.  

·        Opportunities Amidst Divergence by Kristina Hooper Invesco Chief Market Strategist Link to Article

o   COL: A more optimistic take perhaps (seems to favor more risky small cap equity than the other reports).

·         Measure of Leadership: CEOs and Directors Navigating Change by Jason Baumgarten and Julie Daum of Spencer Stuart Link to Harvard Law School Forum on Corporate Governance

o   COL:  Surprised to see the gap in “priorities” between company leaders and the workforce (far apart on Company culture, similarly, aligned on Stakeholder Activism?)

·        Why Corporate Bonds are so hot right now [Financial Times] Link to Article

o   COL:  Definitely a consistent theme in a lot of the news (and meetings I was in this week) that the bond market has been on fire. The JPM podcast below is a good listen. But it is interesting here that the author references the corporate Bond Market Distress Index being low (relative to what Apollo and Oaktree talk about above… are they just talking their own book or has the default cycle not made it into the data yet?) Link to NY Fed Default Index  

·        Blackstone switches to ‘best and final’ offer for Hipgnosis Songs Fund [Financial Times] Link to Article

o   COL: A game of chicken (greenmailing?)  between Blackstone and Merger Arbs funds? Interesting to see that Blackstone switched the structure to a scheme of arrangement increasing the vote acceptance level to 75%. Also, for anyone interested Bill Anderson has a good podcast interview (Evercore Edge Sept 20, 2023 “Demystifying Arb Trading in M&A”) with TIG’s manager and general partner Drew Figdor. TIG is now the largest shareholder in Hipgnosis.

·        The Takeaway: A Q&A with Justin Abelow on Financial Sponsors M&A Activity [Houlihan Lokey] Link to Article

o   COL: A brief Q&A interview but the stat I found stagger is the 11,000 portfolio companies in the US and ~28,000 globally “waiting to be monetized”. Eventually that dam will burst.

Podcast Episodes

·        Value Investing with Legends- Todd Combs- Charlie Munger’s legacy (May 3rd, season 10 episode 1)

o   COL: Anything related to Charlie Munger is worth a listen (or read). Munger’s view that it is a “moral duty to get better and learn” is a great message. Also appreciate that he always looked for “win win transactions, where you would be happy to be on the other side”. Admittedly I haven’t read Poor Charlie’s almanac (although know I should) but I did really like Charlie Munger: The Complete Investor by Tren Griffen Link to Columbia University Press  

·        Masters of Scale: Rapid Response: Power moves for the planet, with GE Vernova CEO Scott Strazik June 18th

o   COL:  Interesting to hear how a lot of the technology we need to electrify and green the planet exists just needs to be “scaled”. His discussion of the US Power grid and how it needs new “brains” was insightful and their focus on small module reactors as part of the solution. Also appreciated the description of the freedom spin-off companies off feel coming out of big conglomerates. As Scott described they are a “two-month-old start up” coming out of 140-year-old conglomerate.

·        HBR Ideacast: Yum! Brands’ former CEO on why you should never stop learning (June 11, Episode 973)

o   COL: A good tie into the Munger discussion above about continuously learning. Look forward to reading David Novak’s upcoming book on how leaders learn. Appreciate his view that “the very best people we had in our company were avid learners” and the need to be open minded and learning to prepare. The story about the invention of cool ranch Doritos is also great!

·        Think Fast, Talk Smart: The Art of Negotiation, How to get more of what you want (June 4, Season 5, episode 145)

o   COL: Have been on a bit of a negotiating kick recently (following the book 15 Tools I mentioned two weeks ago). This podcast reinforced the benefit of being prepared and suggested negotiations be framed as collaborative problem solving. Also found the concept of “chunking” (bundling vs. going item by item) given it helps identify what is important to each side.

·        JP Morgan Making Sense: What’s the deal? State of the High Yield Debt Capital Markets (June 21, Episode 207)

o   COL: A brief (7 minute) but solid look at the current HY market. Spreads are at 15-year tights and trading 200 bps inside the “norm”, leverage loan primary activity up 400% (really shows how “gummed up” the markets were in 2022/23). Unfortunately, their data suggests the forward M&A pipeline remains light @ $38Bn with about 2/3 of that as loans and 1/3 bonds

·        JP Morgan Making Sense: What’s the deal? JP Morgan’s Board Summit: Takeaways for Directors in 2024 (June 14, Episode 206)

o   COL: A brief synopsis of JP Morgan’s non-executive directors conference (~200 directors, 575 unique companies). Interesting to hear that succession planning is the most important topic in the board room today and that AI Strategy/planning is potentially under-hyped not over-hyped.

·        Founders: How to Sell Like Steve Jobs (May 27, Episode #350)

o   COL: A book review of the book the presentation secrets of Steve Jobs. Some very good learnings in here (I’m sure the book itself is even better) but like the discussion on taking a complex topic and making it simple/use direct language.  Also reinforces the “three points” concept (what are the three main take-aways) and that each point should be reinforced with stories, easy to remember facts and social proofs. Audiences want to be informed and entertained. This seems nearly impossible to me, but they claim a great presenter will put in nearly 90x the practice as the actual presentation (so 90 hours of practice for 1 hour of presentation).