 Welcome back to the deal room and we've got a bit of a Christmas treat for you. We're going to finish the year with a two-part kind of episode. So we're going to break it down and it is essentially the top 10 banking themes in review from this year and what Steven's done is really great because actually, I think, if you're just interested in anything that's corporate finance, you'll really like the way he's broken it down. But more so, if you're a student, you've just been busy or you just haven't had time to catch all the previous episodes because probably cumulatively, there's a few hours worth by now. This two 20-minute episodes are going to really compact it, distill it down into what you need to know. And hopefully, even if you are going from zero, you should be pretty competent in terms of your know-how of how things have finished at least 2023 and a couple of things to look out for in 2024. So it's super useful for applications and things like that. If you're a student. So, without further ado, let's get down into this and we're going to do in this episode, spot 10 to number six and then we'll get the countdown from five to one in the next episode. So what do we have, Steven? Number 10 to kick us off in the chart. I'm a little bit disappointed on that. I thought you were going to insert some big over your big sound recording, you know, number 10, coming in at number 10, or maybe you're still going to do it. Yeah. Well, look, coming in at number 10, maybe I can try and do it with my own voice. Coming in at number 10, this is a theme that we've spoken about a lot. The Saudis come to play and they specifically come to play when it comes to sport and culture. If you've been a follower of this podcast for the last six to nine months, I reckon we've probably spoken about Saudi Arabia and say and spoken about their public investment fund, the PIF about $750 billion of capital to deploy, we've spoken about them a lot in a lot of different contexts. But the one that I want to just raise as one of the key top 10 themes of this year, 2023, my gosh, the Saudis have really gone into sports in a significant way. And my stat for this, I'm going to try and give you a stat for each one of these 10, my stat for this, between June 2021 and June 2023, the Saudis have spent about $6.3 billion on sports deals. Now, that's a lot of money. And it's a lot of money when compared to the $1.4 billion they spent between 2015 and 2021. So that is a significant acceleration, a real strategic acceleration that we have seen across football. We've seen across Formula One. We've seen across golf. You know, this has been something that we've really enjoyed speaking about during 2023. So if you were to pick one football player, major headline football player who's not at the moment in Saudi Arabia in 2024, who do you think they're going to go for? Oh, that's a good one. Why don't we go to Neymar's already out there, isn't he? I was going to pick Neymar. Ibrahimovic, you could have picked, but he's now become the sporting director of AC Milan's investment unit that I think you put an article about that out a couple of days ago. This is a tough one. It's a very, very tough one. Who loves the money? Who do you reckon, who loves the money? Well, I don't know. How much did Harry Kane go to Germany? He could make a lot more money out there, surely. And he's not young anymore, is he? He's not young anymore, but I've seen him in his later hosane with a picture of beer. He seemed pretty happy out there. So that's a good point. I don't know. It's a really good question. I'm not going to talk about it. I'll tell you what, I'll tell you what. Well, let's put this out to everyone who listens. Drop us a comment on the show and let us know. Who do you think would be the eye? The prize kind of transfer, if you like, for Saudis to get in 2024? Drop a comment on the podcast. Let us know. Or if you're watching this on YouTube, a comment. All right. Well, look, let's move this move the show on. And let's talk about coming in at number nine. The sports industrial complex enjoys a breakout year. Yeah. So this is actually, I wanted to tie these two together because we've spoken a lot, both obviously about the Saudis and the soft power and the culture washing and the sports washing, quote unquote, that that they've been that they've been doing in 2023. But link to that is this breakout year for what I call the sports industrial complex. So sports as business and the kind of the monetization of sports and sports obviously over the last 20 years have become ever increasing business as investors flock to a scarce asset. You know, there's a degree of scarcity. There's only going to be one Manchester United and, you know, scarcity is mandated in the US professional leagues as well. So scarcity plus the wide range of television rights and merchandise and even turning some of the some of the capital into into NFTs and things like that. So in a bad year for M&A in general, and obviously we'll talk a lot about M&A as a trend, sports deals has been a rare right spot. Now, here is an absolutely killer stat between 2018 and 2023. The combined value of Forbes analysis of the 50 most valuable sports franchises has increased by 90 percent. 90 percent increase in the top 50 global sports franchises. This is becoming big, big business. And do you know what I saw? Something that was super cool, but was a little bit pitching not for 2024, that's for sure. Long term, because this person had this augmented they're watching a basketball game, NBA or college basketball. And they had the the big screen up like a TV in their room. Then they had the augmented court with the players running around on a virtual surface on the table that was mimicking the actual live game. I mean, that that was just phenomenal. I was like, crikey, if they can actually not, I mean, obviously, we're not again talking 2024, but long term, it feels like sports. It's almost a good time with the rise of affluence in China, India, the rest, Africa as a continent. There's so much more to come with sport, it feels like. And like you said, it's almost like a natural resource. There's only so many deposits of these these teams that exist. And thunder and absolutely critically, you're absolutely right. Absolutely critically. It's one of the only things that we now want to watch and need to watch live. So if you think about streaming, it's totally busted the TV model apart from for sports, because I don't want to watch a whole match on repeat, having accidentally already glanced at the score on one of my apps. It really is something that's very scarce and very valuable. And just a couple of things to bring this one to a close. Obviously, we've had the big acquisitions over in the states of the Washington Commanders, six billion dollars. It's one of the biggest ever sports acquisitions, if not the biggest actually. Michael Jordan's selling the Charlotte Hornets for three billion dollars. And this is an interesting one. So Goldman Sachs, we've spoken a lot about Goldman Sachs this year on the podcast, retrenching, pulling back from various different divisions. However, in September, they launched a new sports franchise unit within its investment bank. So as everything else is pulling back, the one thing that's pushing forward from a Goldman Sachs perspective is sports. So again, if you're thinking about your career and your loving sports, it's not a bad place to be. I wonder if you were to map an economic cycle and people's just general degradation in their way of living through a cost of living crisis. I wonder if sport actually becomes more popular because it's like almost like an outer body. Like you're living your dreams through hence the cultural connections to teams like Manchester or Liverpool and things like that, where typically it's a working class man's clubs. I wonder where the sports teams can kind of ride out their kind of economic cycles to some extent and actually from an investment perspective. Yeah. And look, they are they are the the ultimate necessity good for so many sports fans around the world. And they've, you know, from an economics perspective, buying, you know, buying a season ticket to your local football club is a very inelastic good. They can raise the season ticket prices and there'll be some grumbles. But you need to be there if you're a diehard fan. So it's a brilliant business to get involved in. And obviously this is one that's going to going to run and run, I think, you know, through 2024 and beyond. Cool. All right. Well, look, let's move on to the next one. And, you know, this is such a cool conversation because it is. We've been talking about this these themes so much, but to get the kind of distilled version from you is great. So this one is the mega deals in the oil and gas space coming in at number eight. They feel like they're just nonstop at the moment. Yeah. So this has been more of a Q4 2023 trend, but there has been a wave of mega deals and consolidation in the oil and gas space, especially in the US. And it's actually contributed to a potential slight recovery in the M&A market in Q4 2023. We did a podcast a few months ago about whether we're going to get to that three trillion dollar deal value, which is kind of the lower bar of what we expect to see in terms of M&A. And the oil and gas sector have kind of pulled it out the bag with two absolutely mega deals. So we've spoken about Exxon acquiring Pioneer, $60 billion and Chevron buying Hess for $53 billion. So two deals alone, two of the biggest, if not two, the two biggest in 2023, just a little reminder as to why, why have there been, why has there been this wave of consolidation and wave of mega deals? Well, firstly, these oil super majors like Chevron and Exxon sitting on loads of cash from the good years of 2021 and into 22 in terms of oil prices. Their share prices are quite buoyed by that and by their significant profitability so that they can use their shares in terms of buying another company. There's been a wave of consolidation in order to achieve economies of scale in the Permian Basin in Texas. So a lot of smaller, what, what you would call wildcat drillers have now started to be consolidated by the big players to achieve these economies of scale. And then there's also that last energy security point. All right, you know, if you're thinking about the US government, you're thinking, well, yes, we want to move towards renewables, but we want to make sure that we are totally energy secure. We've seen what's happened in Germany this year, regards to Russia and Ukraine. So let's keep, let's keep the doors open to these oil and gas deals because we want that sector to be really, really well protected. I wonder how many more targets there are in the Permian Basin? I mean, I don't actually know the answer to that question, but presumably, again, it's a natural resource. So there's deposits geographically and there's going to be ownership that exists because there was another deal just this week. Occidental petroleum have agreed to acquire Crown Rock, which again, US private shell oil producer. So yeah, I wonder whether or not that these deals in the year ahead will start to dry up a little bit if the presumably the acquisitions you spoke of are so large, they've probably got so much dominance over that shale that is there much grabs. Yeah, it's quite interesting. And he's also thinking about this in the context of our podcast last week when we spoke about the pharmaceutical industry and pharmaceutical companies, they get value based on what's going on at the moment and their drug pipeline in the future. Oil and gas companies aren't massively different. So oil and gas companies will be valued based on what's going on at the moment and their reserves of oil and gas that they can extract in future years. So this might also be a wave of consolidation to protect the future, the future of these businesses. Yeah, well, if I owned a private smaller shower oil company, I definitely have my for sale sign out the front of my house right now. I might as well cash it in. How should I get to the golf course? All right, well, let's move on. Number seven and surprisingly, number seven, I guess in the in the market trading context, it might have had a little bit of a higher chart position. But in the deal room, number seven, generative AI. So what do we have here? Yeah, it's an interesting one that would be higher. But if you actually think about the grand context of the world of the IBD division and the world of investment banking, what part does generative AI play? Well, from a deal making perspective, extremely, extremely small. So coming in at number seven, generative AI and the new hype cycle. This will definitely be number one across all of the podcasts in terms of them, thematic investments and thematic hype, best represented by open AI, of course. So open AI has recently received a valuation, a private valuation of over 80 billion dollars. That's a 175 percent jump in valuation since April. So just a few months ago. And this is the stat that really landed it to me. So revenue for open AI in twenty twenty two was twenty eight million dollars. Revenue predicted annualized revenue in twenty twenty three to predict to be one point three billion dollars. Now, think about that from a growth rate perspective. And this is why this company, even that is 60 times revenue at an 80 billion dollar valuation. But my gosh, if they're growing it anywhere near, they're not going to be able to grow at that rate in the future. That's quite remarkable, but it's it's staggering. Isn't an 80 billion dollar valuation rather conservative then? Well, I would agree if they managed to capture it. So often in these markets, you end up with two or three big players. I think you see this actually in the crypto space. It's a very different market. But the first movers with a technical moat with the hype around it, they might well be the ones that push on and breach that kind of small, low billion dollar valuation into the into the hundreds of millions and then starting to kind of reach up to those four or five very, very big tech players. Open AI will I think will make it the likes of co here. Anthropic, that's got a twenty to thirty billion dollar valuation. That might be the second one that comes along in terms of this next wave of generative AI, but it's a it's a it's a very frothy industry and business, but very exciting as well. It's a quick final question on this one then. So in 2024, could one of the big mega cap tech names take them out? Just buy them and would regulation permit that type of move? It's a really good question. I don't think regulators would permit one of the big six or seven tech firms to buy any of these promising generative AI startups. And this has kind of been evidenced by Google and Amazon taking a minority state in Anthropic and obviously Microsoft's engagement with open AI. Although that's looking. I love that. What are you? The lawyer for Microsoft is very carefully chosen language there. All right, I was about to say it's an acquisition by any other means. So maybe I'm not not such a lawyer. But yeah, I mean, they will try and get as much of their hands on these types of technologies as they can without being blocked from a regulatory perspective. As we've said in previous podcast, we really do hope that some of these companies in this new industry, you know, a potential addressable market size of 500 billion of one trillion, whatever you want to read, we really do hope that one or two of these companies make it stand alone and can start to bring that next generation of new companies through because we can't, you know, it's not particularly healthy just to have the same companies dominating the markets year in, year out, as we've seen for the last 15 years. OK, final one then, number six in your countdown, what do we have? OK, so this is a bit more kind of industry wide. So number six, down rounds and bankruptcies sweep across venture capital. Now, this was actually one of the stories that we discussed last week, but it's something that really is a massive, massive theme in 2023. As I said last week, 2021 was an absolutely bubble year for startup valuations and for VC funding and for things like that. And then the wheels came off in 2022 as interest rates rose, but it was really 2023 where startups really felt the pain and VCs felt the pain. So a few stats to land this story. So as I said last week, 90 percent of unicorns have seen a decrease in their valuation in 2023. 20 percent of all startups raised money to lower valuation than previously. Bear in mind in 2021, that was just five percent. Two hundred and twelve venture back startups shut their doors in Q3 of 2023 compared to 67 in Q3 of 2021. And in Q2 of 2023, there was twenty nine point four million dollars worth of US backed equity financing, so VC financing. Whereas in Q1 of 2022, there was eighty one point eight billion. So, I mean, all of this lends me to say this has been an absolutely shocking year if you're a startup founder, trying to raise money in the private markets in the VC markets. And it's been a pretty shocking year for VCs as well. Well, you know, experience makers, the person. So if you can survive this episode, then it's probably set you up for certain skills to to innovate and create. Yeah, it's it's it's always the very kind of world trodden saying is that it's the best time to start a business. When times are tough, the best time to start a business. Because what you're doing as an entrepreneur, firstly, you really need to solve a pain point that people are willing to pay for. This is not discretionary stuff. You need to solve a real problem who's, you know, cash is strapped. And then secondly, the way that you operate your business, you're not going to be taking people, you're not going to be taking your team on luxury corporate retreats every quarter and getting in, you know, Beyonce to sing at it. You're going to be batting down the hatches and going into resilience mode. And that is a really well, that's a really good place to start a company. And then maybe the largest can come slightly later in the cycle. That's it. I'm going to have to start Christmas party tomorrow, Stephen. I'm going to have to call Beyonce and tell her she's not welcome. Stephen doesn't want you here. Down to down, down to down. How are you OK? I think that's what we should do. All right. Well, look, just to conclude then, we've done the countdown. We've gone from 10 to six next episode. We go from five to number one. So make sure that you subscribe to the channel, hit the bell icon so you get notified as soon as that final episode of the year on the deal room drops. But to finish, perhaps you can pick out of those just discussed. One of those trends that you think will continue in 2024 and one that you think perhaps won't and that is done. And we can look in the rear view mirror now. Yeah, so I'd say one trend to continue. I think it's got to be the AI hype cycle and often hype cycles flare and then burn out. But this one seems to have a little bit more legs to it. And just taking a look at a little a few of the use cases and taking a look at the way that businesses are engaging with this new form of generative artificial intelligence as a business aid and a marketing tool. It seems like this is number one conversation across every single CEO of every single type of company in the US and in the Western markets. So I just think that this is going to go from strength to strength. And it's going to continue to be a bit of an arms race, you know, US versus China with Europe probably lagging a couple of years behind as it tends to do. And yeah, we might well see the big multi hundred billion dollar companies coming out over the course of 2024 and beyond. And someone else who perhaps has still got plenty in the coffers to go the Saudis, do you think they can continue to push on? Yeah, I don't think the Saudis are going anywhere. This is their strategy. They're very, very focused on this and they're very, very professional about it. There has been a few setbacks with live and with the PGA tour over in the states, although they've just managed to sign John Rahm, one of the most successful golfers of our generation. So yeah, they're not going anywhere. And and I think they're hosting the Olympics in 2032 or something like that as well. So yeah, we're going to be seeing a lot more of them. OK, and then if any of the list that you think that was it 2023 line in the sand, you're done. Yeah, I'm being hopeful here. I think that the the wave of down rounds from a VC perspective, the wave of bankruptcies from a startup perspective, I think that the pain has been felt most acutely in 2023. And I think that 2024 we're actually going to see a recovery in valuations. We're going to see a stabilizing of interest rates, which is kind of what we've already seen towards the back end of 2023. And I think actually 2024 was going to be a really good year to be a startup founder. As confidence recovers and returns to the market. So yeah, I think that's one that's down rounds. They've written their course 2023 bring on 2024. Yeah, I think the combination of the soft landing narrative, which is looking pretty solid at the moment, at least. And the combination of probably the markets a little bit advanced in when they think rate cuts are going to happen. But certainly we've topped out and we're coming down now. So I'd agree with you for sure. All right. Well, look, good episode. And as I said, we'll be back for the countdown from five to one the following week. So stay tuned. Thanks, Steven. Thank you, Anne.