Scott Beiser: Sure. Good question, Ken. First of all, I think in all the statistics that we’ve seen, when others do these kinds of surveys. In a higher interest rate world or a tougher to excess debt capital, sponsors are putting in more equity than they normally would. So, the percentage of the capital structure now has more equity on a percentage basis than we’ve seen in some previous years. So that would be the first comment. The second comment then tied into that, is all things being equal in a higher interest rate world, you are going to achieve lower IRRs from kind of a principal standpoint that obviously has some impact on what buyers and sellers think the valuation is. What we find, and especially in the mid-cap space that we participate in is there is a growing number of nontraditional banks that are providing that financing.
And when you look at the amount of raised by sponsors in this, we’ll call it, private debt capital environment. It is substantially greater today than it ever was several years ago. So, we’re getting new entrants into the marketplace. Yes, it comes with a higher interest rate. Yes, therefore, it should have some impact on IRRs and valuations. But ultimately, as time goes on, I do believe that buyers and sellers and lenders and borrowers just get closer and closer to seeing the world through the same vantage point. And that’s what ultimately gets deals done when they have completely different vantage points, that’s when deals kind of stalled. And so all of those reasons, I think we’ve tried to describe in previous quarterly calls, do suggest that people are getting closer and closer to that equilibrium point.
And therefore, we do see the activity level is increasing still, like I said, not probably at the pace that maybe we expected based upon the prior periods, but it is improving.
Lindsey Alley: And one thing I would add, Ken, is if you take a look at the typical Houlihan Lokey transaction, the type of leverage versus equity. I’m not sure it’s any different than what our publicly traded peers are doing in terms of levels. I think that the significant difference is the participants. The larger transactions is likely either high yield or a bank syndicate market, versus the private credit market, and all three behave very differently. And the private credit market in this environment has just been more robust than either the public debt markets or the bank syndicate market. And I think that’s why you might be hearing slightly different views on how the capital markets are doing from a Houlihan Lokey versus a firm that does $3 billion, $4 billion, $5 billion, $6 billion transaction.
Ken Worthington: Perfect. Okay. Thanks very much.
Operator: Thank you. Next question comes from the line of Ryan Kenny with Morgan Stanley. Please go ahead.
Ryan Kenny: Hi, good afternoon. Thanks for taking my question. So, on the non-comp side, there’s a comment around expecting non-comp to be seasonally higher in the second half of the year. Any color on the puts and takes there and how high it could get, how we should think about the run rate heading into the next fiscal year?
Lindsey Alley: I don’t want to give specifics. I mean, there’s a fair amount of public information. If you look at over the last five or six years, you’ll get a sense, COVID was a little unique. And the breakdown of non-comps, and maybe throughout one or two years, they are 2020 and 2021. But when you look at pre-COVID, then even last year and take a look at the non-comp ratio first half versus second half, and that’s not a bad proxy.
