James Yaro: Good morning. And thank you for taking my questions. Paul, maybe we could just start with the macro backdrop and how is this impacting your business? We obviously have more geopolitical uncertainty as you’ve alluded to higher rates and obviously upcoming U.S. election. So maybe you could just talk about what that means for the M&A inflection and perhaps the cadence or timeline for which — over which we see return to normalized levels of M&A.
Paul Taubman: Look, we came into this year James, with perhaps the most sober assessment of the M&A marketplace. And we assumed that this would be another down year in the market, I think, notwithstanding that, it was probably damper, it was lower levels, it was more difficult to affect transactions and even wait on the more bearish side had expected to see. And when you deconstruct it, it’s many factors all moving to the negative direction is volatility and difficulty in agreeing on price. It’s constrained financing in terms of the quantum of committed financing available. It’s cost of financing, which makes it harder for buyers and sellers to agree It’s a very strong antitrust policy and enforcement from the administration, which whether they prevail or not, has a chilling effect on a number of deals because companies are not willing to subject themselves to that uncertainty.
It’s this continued drumbeat of whether or not we’re going to head into a recession. It’s difficulty controlling costs on every dimension, it has been more difficult to get transactions done. But what has been different in this cycle is company’s desire to move forward with their strategic agendas remains essentially undeterred. And that’s sort of the, betwixt in between where as difficult as it is to get transactions done. Companies’ desires to manage their portfolio to gain core competencies to benefit from scale economies and the like that, that has remained unchallenged. And then if you add to that, the difficult fundraising environment and alternatives, and a little bit of indigestion from all of the capital that was put out in 2021, sponsors have been meaningfully less active in the marketplace.
I think the number of portfolio companies that would like to the IPOed is building so you have an awfully large backlog. And it’s unclear how many of those companies will ultimately get liquidity events in the relative near term. And I think that also in the ecosystem has an effect on how aggressive private equity firms are in putting capital out. And if there’s less confidence that there’s a private equity bid for businesses, companies are perhaps more reluctant to initiate a sales process. So all of this feeds on itself. But as I said, inevitably, markets adjust. And I think we’re in the adjustment phase on many of these factors. And I think we’re a lot closer to getting out of the tunnel. But it’s been — but it’s been a long, dark tunnel.
James Yaro: Okay. That’s really helpful perspective, Paul. And just as a follow up, just on the hiring, you’ve obviously had tremendous success so far with that this year. Maybe you could just speak to whether you see the same opportunities for hiring today versus the, let’s say, the beginning of this year, and what you what your expectations are for hiring into 2024?
Paul Taubman: I think we’ve talked consistently about two impediments to attracting all of the talent in the previous two years. One was the anomalies of COVID, just being in a remote environment, not being able to create those personal connections, that was a unique period of time. And that significantly constrained hiring, and we’re well past that, thankfully. And the second is that in 2021, that headwind was linked to the extraordinary melt up in M&A activity. And therefore the friction costs for senior practitioners to leave firms and take long periods of time on gardening leave, those friction costs were extraordinarily high. And those two together had a chilling effect on our ability to recruit. And what we now have is probably the best environment we’ve seen in a long time, because the fundamental attractiveness of our firm continues to build.
