Latest / Bloomberg Intelligence / Marvell to Acquire Lumentum in Historic $115 Billion Tech Deal

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Marvell to Acquire Lumentum in Historic $115 Billion Tech Deal · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios.
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  Speaker 2: Podcasts.
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  Speaker 3: Radio.
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  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 5: Let's get some more reporting on that Monster M &
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  Speaker 5: A transaction. Ryan Gould joins us here, Bloomberg Deals reporter. Ryan,
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  Speaker 5: Marvell reaches $ 115 billion deal for Lamentum Holdings. This is
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  Speaker 5: just a huge dollar amount. What's going on here? What
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  Speaker 5: is Marvell trying to achieve?
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  Speaker 6: So, Paul, this is essentially, as Marvell sees it, a
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  Speaker 6: doubling down on its relationship with both a crucial provider
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  Speaker 6: of optical solutions that we find in data centers. And also,
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  Speaker 6: I think, as one of the CEOs of one of
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  Speaker 6: the companies said on a network that won't be named
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  Speaker 6: this morning, and a direct quote from him, this is
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  Speaker 6: a doubling down on supporting NVIDIA. I mean, what is
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  Speaker 6: a chips deal today without NVIDIA? They're coming up everywhere.
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  Speaker 6: NVIDIA backs both Marvell and Lumentum. These chips that, you know,
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  Speaker 6: Lumentum up until this point has made has become sort
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  Speaker 6: of a pure play provider of optical solutions that are
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  Speaker 6: so crucial to data center buildouts. Marvell has been trying
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  Speaker 6: to divert more into that area. Earlier this year, it
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  Speaker 6: acquired a private company called Celestial AI for about $ 5
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  Speaker 6: billion all in upfront. So I think it kind of
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  Speaker 6: showed its hand then. But make no mistake, this is
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  Speaker 6: an absolutely enormous deal. I described it last week as
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  Speaker 6: sort of an audacious bet at M & A, take
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  Speaker 6: on M & A in 2026. If you think that
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  Speaker 6: we're a day out from the midterm elections and you've
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  Speaker 6: got someone, you know, doing probably one of the largest
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  Speaker 6: tech deals ever, if not one of the largest M &
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  Speaker 6: A deals ever by equity value, I think it's quite gutsy.
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  Speaker 1: Yeah.
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  Speaker 7: It reminds me, fairly or unfairly, Paul, of TXU and
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  Speaker 7: Hilton in 2007, not so long before the financial crisis. Ryan,
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  Speaker 7: my question to you is Marvell, I'm looking at how
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  Speaker 7: many people it has at the company, 7,400 employees, Lumentum,
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  Speaker 7: based in San Jose, not far from Santa Clara, 13,757.
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  Speaker 7: Is this a transaction that's going to lead to massive
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  Speaker 7: job cuts?
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  Speaker 6: I mean, you know, there are quite clear synergies that
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  Speaker 6: the companies have outlined. But I mean, when you think
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  Speaker 6: about bringing a company of momentum size under the roof
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  Speaker 6: of Marvell, I mean, you'd probably have to guess there
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  Speaker 6: would be some cost synergies based on labor for sure.
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  Speaker 6: But I don't think that's necessarily a surprise at M &
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  Speaker 6: A today. I think just as you think about some
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  Speaker 6: of the demands from a cost perspective on the top line,
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  Speaker 6: you know, semiconductors has typically been quite a CapEx intensive business.
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  Speaker 6: And I think if you can sort of maybe optimize
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  Speaker 6: some of that on the cost level, you know, you
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  Speaker 6: probably wouldn't necessarily fault them for that. I will just say, though,
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  Speaker 6: I mean, these are two companies that have kind of
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  Speaker 6: been sort of operating on divergent paths for a while.
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  Speaker 6: And now to see them come together, for those of
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  Speaker 6: us who know semiconductors, it's very cyclical. But we've not
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  Speaker 6: really seen this. I mean, a few years ago, you
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  Speaker 6: wouldn't have thought about this deal happening at all. And
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  Speaker 6: here we are today sort of looking at this thinking, well,
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  Speaker 6: you know, if it weren't for these AI large language models,
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  Speaker 6: you you know, perhaps Marvell wouldn't have seen the types
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  Speaker 6: of gains it's seen in its stock price. Lumentum would
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  Speaker 6: have become probably still, would have still been a sleeping giant.
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  Speaker 6: But yeah, M & A does funny things.
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  Speaker 8: It's interesting.
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  Speaker 5: About 30 seconds left here. This is an all stock transaction.
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  Speaker 5: So we have Marvell's stock down about five and a
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  Speaker 5: half percent and Lumentum's down about 10.6%. Is this just
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  Speaker 5: reflecting dilution or do you think, are you hearing anything
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  Speaker 5: in the marketplace that maybe people are not sure about
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  Speaker 5: this deal?
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  Speaker 6: Paul, just quickly, I think there are a couple of things.
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  Speaker 6: This deal is going to basically take out, again, just
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  Speaker 6: to reiterate, an indium phosphide pure play player in Lumentum.
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  Speaker 6: There is now no longer really a sort of bet
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  Speaker 6: if you're a public equity investor on just that specific
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  Speaker 6: technology with this deal. So, that's one thing. The dilution
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  Speaker 6: is another thing. And you saw that the reaction of
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  Speaker 6: Marvell shares last week when we put out the exclusive
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  Speaker 6: story just on the deal talks. I think people are
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  Speaker 6: trying to just get their heads around exactly what this
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  Speaker 6: will mean for for them. Yeah. And I think just
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  Speaker 6: to close out here, on an equity basis, we've just
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  Speaker 6: done the calculation based on sort of proper share accounts.
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  Speaker 6: And this does put the equity value, the implied equity
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  Speaker 6: value of the deal at $ 102. 6 billion. So comfortably the
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  Speaker 6: largest of the year.
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  Speaker 1: Stay with us.
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  Speaker 8: More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 1: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
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  Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
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  Speaker 1: you get your podcasts or watch us live on YouTube.
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  Speaker 5: Anthropic, the IPO prospectus, the S1, is about 326 pages,
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  Speaker 5: give or take. I think 96 of those pages were
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  Speaker 5: risk factors. And one of them is... There's no real
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  Speaker 5: law around this AI thing that could open the company
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  Speaker 5: up for some litigation risk. Matt Scheltenhelm, he's all over
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  Speaker 5: those 96 pages of risk factors. He's a media litigation
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  Speaker 5: analyst for Bloomberg Intelligence. So, Matt, if I'm anthropic, the
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  Speaker 5: law surrounding my business, the AI business, it's not that
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  Speaker 5: well defined. So how do I think about my risk there?
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  Speaker 3: Yeah, as you said, Paul, this was a big part
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  Speaker 3: of the S-1 filing. A lot of discussion of what
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  Speaker 3: this could mean in terms of litigation exposure for the company,
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  Speaker 3: in terms of interference by the federal government, and in
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  Speaker 3: terms of what is the legal regime going to look
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  Speaker 3: like going forward for the entire AI world. And so
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  Speaker 3: that's sort of big questions facing the company. And we've
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  Speaker 3: seen it for Anthropic specifically already just in the last year.
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  Speaker 3: In February, this administration designated the company a supply chain
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  Speaker 3: risk and the company's having to litigate over whether that
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  Speaker 3: was lawful. In June, the federal government put on these
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  Speaker 3: export control restrictions and made the company shut down its
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  Speaker 3: Mythos 5 and Fable 5 models. is that lawful? Is
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  Speaker 3: that the regime we're going to live in going forward
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  Speaker 3: where the administration can do this? Or are there going
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  Speaker 3: to be guardrails about how this works? And then the
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  Speaker 3: big questions, what if this stuff causes harm? And then
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  Speaker 3: can you sue over it? And how big is that risk?
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  Speaker 3: There are no specific laws addressing these questions. We're applying
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  Speaker 3: old laws to very new technology, and the scale of
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  Speaker 3: potential damages is enormous. So huge questions facing the company
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  Speaker 3: in the legal space.
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  Speaker 7: Yeah, these feel like unanswerable questions bordering on existential questions
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  Speaker 7: as well.
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  Speaker 5: Well, I mean, if you cause the earth to cease
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  Speaker 5: and mankind to cease, that would be litigation risk, I
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  Speaker 5: would think.
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  Speaker 4: Yeah, sure.
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  Speaker 7: Whoever's left to lead the lawsuit. What does this mean, Matthew,
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  Speaker 7: for how OpenAI proceeds? I mean, I'm sure it's looking
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  Speaker 7: at this pretty carefully and thinking we have to do
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  Speaker 7: all this and more, or we just kind of follow
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  Speaker 7: what um, anthropic does in terms of, uh, the, all
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  Speaker 7: the potential risks laying it all out.
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  Speaker 3: Yeah, I think, I think it's, it's all of this
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  Speaker 3: and more, and everyone's trying to figure it out right
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  Speaker 3: now and, and trying to, you know, disclose risks and,
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  Speaker 3: and to say, you know, one, one, one legal issue
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  Speaker 3: that comes up along down the road is did you
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  Speaker 3: fail to warn of potential risks? And you can, you
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  Speaker 3: can see legal claims in social media about that right now. Um,
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  Speaker 3: And you can envision a world where that comes up
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  Speaker 3: down the road for these AI companies. And so part
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  Speaker 3: of this right now is just disclosing the risk to
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  Speaker 3: try to dampen damages claims that could come later if
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  Speaker 3: the worst case scenarios do materialize. So I think right
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  Speaker 3: now it's in part lobbying at both the state and
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  Speaker 3: federal levels to try to push lawmakers to understand this
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  Speaker 3: stuff and to try to land on a sensible approach
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  Speaker 3: for the business. But it's also trying to prepare for
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  Speaker 3: potential litigation if we don't go through legislatures, if we
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  Speaker 3: go right to courts and we have some sort of big,
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  Speaker 3: big incident that the courts are left to grapple with
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  Speaker 3: without any law on the books specifically addressing it.
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  Speaker 5: So, I mean, from the company's perspective, given all that
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  Speaker 5: ambiguity out there, How can it protect itself realistically? I'm
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  Speaker 5: trying to side with the issuer here because, I mean,
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  Speaker 5: they are breaking new ground and potentially doing amazing things here.
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  Speaker 8: What can they do?
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  Speaker 3: Yeah, so when you think about, you know, think maybe
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  Speaker 3: the claim is negligence. And that's basically, did you exercise
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  Speaker 3: reasonable care? That's going to be the basic question that
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  Speaker 3: would go to a jury if there was some large-scale
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  Speaker 3: incident here. So as a business, what you're trying to
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  Speaker 3: do is to be careful, is to exercise reasonable care
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  Speaker 3: and to warn of these risks, to try to put
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  Speaker 3: in place preventative measures to prevent them from happening. And
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  Speaker 3: then if something does happen, eventually you can come in
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  Speaker 3: and say, look, sometimes bad things happen, but that doesn't
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  Speaker 3: mean we didn't exercise reasonable care. And so I think
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  Speaker 3: that's the best you can do without more, more precise
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  Speaker 3: guardrails in place is, is be careful and, and try
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  Speaker 3: to anticipate what that litigation would look like, um, in
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  Speaker 3: the future and, and try to get in front of it.
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  Speaker 7: What do you think in terms of legislation? I mean, um, Congress,
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  Speaker 7: if we are to believe the polls will be split
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  Speaker 7: or perhaps blue. President Trump obviously has veto power. States
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  Speaker 7: can do a lot more potentially. How do you think
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  Speaker 7: through all of this?
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  Speaker 3: Yeah, that's that's sort of how I see it right now.
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  Speaker 3: I think the next two years, even if the Democrats
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  Speaker 3: do advance to control. the House and perhaps the Senate,
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  Speaker 3: it's going to be very difficult with President Trump having
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  Speaker 3: that veto pen over the next two years based on
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  Speaker 3: his comments that, look, all we need is me. I
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  Speaker 3: can control everything. We don't need Congress setting these standards.
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  Speaker 3: That's not really a framework that looks like we're going
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  Speaker 3: to have serious discussions at the federal level over the
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  Speaker 3: next two years about the most logical way to regulate AI.
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  Speaker 3: I think so for that reason, the next two years,
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  Speaker 3: it's really going to be the states moving ahead, advancing
• 10:33
  Speaker 3: ideas here. You may see California, New York, Colorado, states
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  Speaker 3: like that kind of pushing the ball forward on what
• 10:40
  Speaker 3: makes the most sense. And those could start to pass.
• 10:44
  Speaker 3: And then Congress in 2029, when potentially we have a
• 10:49
  Speaker 3: new president, could then get more serious about adopting those
• 10:53
  Speaker 3: state approaches at the federal level.
• 10:56
  Speaker 8: Stay with us. More from Bloomberg Intelligence coming up after this.
• 11:04
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 11:07
  Speaker 1: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
• 11:10
  Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
• 11:14
  Speaker 1: you get your podcasts or watch us live on YouTube.
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  Speaker 5: Earnings continue to come in today from Marriott International. They
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  Speaker 5: had some pretty good numbers. The stock is trading higher today,
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  Speaker 5: hitting a, it's up about almost 5% today, up 35%
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  Speaker 5: year to date. It's a 52-week high, and it's an
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  Speaker 5: all-time high. So some good numbers out of Marriott. Let's
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  Speaker 5: break it down with Jody Lurie. She's the senior credit
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  Speaker 5: analyst for Bloomberg Intelligence. Jody, what's Marriott saying about their
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  Speaker 5: business these days?
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  Speaker 4: So, Paul, I think what's so interesting about Marriott is
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  Speaker 4: we are seeing that that higher-income consumer is benefiting companies
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  Speaker 4: like Marriott. Even stripping out the effects of the World Cup,
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  Speaker 4: which is substantial, Marriott seems extremely optimistic about 2027 with
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  Speaker 4: rev par of 3% to 4% or 3.5% to 4.5%.
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  Speaker 4: And that's compared to 4.5% to 5% for 2026. Of course,
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  Speaker 4: they are seeing some of the effects of the Iran
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  Speaker 4: war and other things at play. But by and large,
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  Speaker 4: we were a little bit surprised, I would say, with
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  Speaker 4: how optimistic management was.
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  Speaker 5: I'm looking at the balance sheet because I did go
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  Speaker 5: through the Chase Manhattan Bank credit training program back in
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  Speaker 5: the day, so I know what I'm doing.
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  Speaker 8: I look at.
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  Speaker 5: Net debt of about $ 17 billion and.
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  Speaker 8: EBITDA of about $ 6 billion. That's a leverage ratio of
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  Speaker 8: three times. I'm happy with that. Are you happy with that?
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  Speaker 4: I think that's in line with what we see as
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  Speaker 4: the low end of their peers. If you compare it
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  Speaker 4: to Choice, which targets to be in that three to
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  Speaker 4: four times range, I mean, Marriott is below that. Choice
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  Speaker 4: is at 3.2 times. And so.
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  Speaker 4: But what's key for Marriott in particular is they like
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  Speaker 4: to access the commercial paper markets, the short-term markets. And
• 13:04
  Speaker 4: in order for them to do so, they need a
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  Speaker 4: mid-level BBB rating to have that short-term rating. So if
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  Speaker 4: you think about it from that perspective and they want
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  Speaker 4: to have that access, they're going to continue keeping their
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  Speaker 4: leverage low, even if they're giving back $ 4. 8 billion in
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  Speaker 4: share buybacks and dividends.
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  Speaker 8: Jodi, what's kind of the....
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  Speaker 5: Capex and a maintenance capex for a company like a
• 13:29
  Speaker 5: marriott and these other hotels because it seems like they're
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  Speaker 5: always upgrading their existing hotels refurbishing them uh maybe even
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  Speaker 5: building new ones what's kind of the maintenance capex for
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  Speaker 5: these companies I.
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  Speaker 4: Mean, it's sort of interesting when they're a management company
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  Speaker 4: because so much of what they have isn't actually owned.
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  Speaker 3: Right.
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  Speaker 4: That's right.
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  Speaker 8: They're the management model.
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  Speaker 4: It's managed.
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  Speaker 1: It's fees.
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  Speaker 4: Exactly. It's an asset-light model. So because of that, a
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  Speaker 4: lot of that is passed on to the owners of
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  Speaker 4: the property themselves. That said, what we find particularly interesting
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  Speaker 4: is in times of stress, Marriott, Hilton, Hyatt, they will
• 14:06
  Speaker 4: lean on their value as... higher rated companies and really
• 14:11
  Speaker 4: substantial companies in the industry to help out those owners
• 14:15
  Speaker 4: in terms of offering borrowing capabilities. So when we saw
• 14:20
  Speaker 4: a few years ago with the risk of small banks,
• 14:25
  Speaker 4: the run on small banks that we saw with Silicon
• 14:28
  Speaker 4: Valley and all those, Marriott was very upfront about saying, hey,
• 14:33
  Speaker 4: we're going to step in and offer these intercompany loans
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  Speaker 4: where we need to to keep the growth of these
• 14:40
  Speaker 4: properties and also the refurbishment of these properties.
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  Speaker 5: So what are the Marriotts of the world? What are
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  Speaker 5: they saying about just demand here, U.S. versus kind of
• 14:51
  Speaker 5: rest of the world, if that's how they think about it?
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  Speaker 4: So U.S. and Canada in particular were strong this year,
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  Speaker 4: and that's partly an effect of the World Cup. But overall,
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  Speaker 4: I think they're relatively optimistic about the U.S. You know,
• 15:02
  Speaker 4: they did make comments about Europe that I found particularly interesting,
• 15:06
  Speaker 4: but they obviously were talking a bit about the Middle
• 15:10
  Speaker 4: East and how that is going to continue being a
• 15:14
  Speaker 4: little bit of a tale of a headwind for the
• 15:18
  Speaker 4: tailwinds that they're seeing elsewhere. So it is affecting a
• 15:22
  Speaker 4: bit of the Europe and elsewhere area. And so that
• 15:27
  Speaker 4: I think is going to be continuing to be a lagger.
• 15:30
  Speaker 5: I mean, it seems like, I don't know, we've seen
• 15:32
  Speaker 5: so much over the last five, ten years of investment,
• 15:36
  Speaker 5: hospitality investment, entertainment investment in the UAE.
• 15:41
  Speaker 8: And just that part of the world over there.
• 15:44
  Speaker 5: That's got to be, a lot of these companies have
• 15:46
  Speaker 5: to be hitting the pause button here and saying, we've
• 15:48
  Speaker 5: got to rethink this maybe.
• 15:50
  Speaker 4: So they're not actually hitting the pause, Paul, because if
• 15:52
  Speaker 4: you talk to Wynn, for example, which we've talked to
• 15:55
  Speaker 4: them a few times about this, they're continuing business as usual.
• 15:58
  Speaker 4: Now things are going to be more expensive. You know, the,
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  Speaker 4: the property that they're building, the first of its kind
• 16:03
  Speaker 4: in terms of a gaming property in the UAE, they
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  Speaker 4: are anticipating that it's going to be a little bit
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  Speaker 4: more expensive. It's going to not start generating the EBITDA
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  Speaker 4: that they anticipate until later into next year. And so
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  Speaker 4: that's a little bit of a tail of a, of
• 16:19
  Speaker 4: a headwind for them. I keep wanting to say tailwind
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  Speaker 4: for some reason. Um, I don't know what's going on.
• 16:25
  Speaker 4: I think it's an earnings sort of mix-up thing going on.
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  Speaker 4: But I think– so I think for someone like Wynn,
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  Speaker 4: which is really, really exposed to the UAE in particular,
• 16:35
  Speaker 4: dumping a lot of capital into that new, brand-new, large facility–
• 16:42
  Speaker 4: I think they're sort of expecting that as much as
• 16:44
  Speaker 4: you might see a little bit of a drop off
• 16:46
  Speaker 4: in attendance and in terms of volumes, eventually it's going
• 16:50
  Speaker 4: to rebound. This is a short term event. We are
• 16:53
  Speaker 4: seeing that at least locally people are participating. Now, what
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  Speaker 4: I would compare that to, though, is if you look
• 17:00
  Speaker 4: at Macau and you look at how MGM did in
• 17:03
  Speaker 4: Macau and how Las Vegas Sands did in Macau, there
• 17:06
  Speaker 4: are some alarming components here. if you think of that
• 17:10
  Speaker 4: China population that may or may not be pulling back
• 17:13
  Speaker 4: a bit.
• 17:14
  Speaker 8: Stay with us. More from Bloomberg Intelligence coming up after this.
• 17:21
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 17:25
  Speaker 1: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
• 17:28
  Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
• 17:31
  Speaker 1: you get your podcasts or watch us live on YouTube.
• 17:36
  Speaker 7: Law firms, big law firms are.
• 17:40
  Speaker 7: I don't even know how to describe it. The world
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  Speaker 7: is falling apart for them.
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  Speaker 4: Yeah.
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  Speaker 5: I mean, this one in particular, Wild.
• 17:46
  Speaker 7: Wild Gottschall, which is very well known for corporate restructuring,
• 17:51
  Speaker 7: finds itself having to kind of restructure its own business.
• 17:54
  Speaker 7: And in this case, it looks like it may end
• 17:56
  Speaker 7: up shutting down completely. I want to bring in our
• 17:58
  Speaker 7: next guest to talk about what's going on in big law.
• 18:01
  Speaker 7: Roy Strom is our Bloomberg Law Correspondent. And what's happened
• 18:05
  Speaker 7: in Wild Gottschall seemed like it happened suddenly. but it
• 18:11
  Speaker 7: actually had been brewing for a little bit because there
• 18:13
  Speaker 7: are defections of some high-profile lawyers. And it all comes
• 18:17
  Speaker 7: back to the idea that a law firm is really
• 18:19
  Speaker 7: made up of its lawyers, and if its lawyers decide
• 18:21
  Speaker 7: to jump ship, that puts the whole firm at risk.
• 18:27
  Speaker 2: That's absolutely correct. And while Gottschall's, of course, become a
• 18:30
  Speaker 2: case study, and last week the firm did decide to
• 18:33
  Speaker 2: wind down after a significant number of defections that have
• 18:38
  Speaker 2: occurred For more than two years, really, but just ramped
• 18:44
  Speaker 2: up recently. And the firm's probably biggest affection came in
• 18:48
  Speaker 2: September when a very prominent, very successful M & A partner,
• 18:52
  Speaker 2: a partner by the name of Mike Gaiello, announced that
• 18:55
  Speaker 2: he was going to join Cravath, which is, of course,
• 18:58
  Speaker 2: a rival M & A shop. And he was not alone.
• 19:01
  Speaker 2: He left after a series of significant departures from the
• 19:05
  Speaker 2: firm's private equity practice and After Mike left, the firm
• 19:10
  Speaker 2: tried to sort of rally around itself and made some
• 19:12
  Speaker 2: new hires and felt like they still had an opportunity
• 19:16
  Speaker 2: to grow and compete. But this sort of psychological phenomenon
• 19:21
  Speaker 2: caught hold as they compare it to a run on
• 19:23
  Speaker 2: the bank where sort of no partner can guarantee that
• 19:26
  Speaker 2: the person next to them will stay. And it becomes
• 19:29
  Speaker 2: increasingly tenuous. And it was a very, very difficult time,
• 19:33
  Speaker 2: I think, for the people involved in making that decision
• 19:35
  Speaker 2: last week. to wind down and ultimately end a 95-year-old
• 19:41
  Speaker 2: law firm history.
• 19:43
  Speaker 5: Yeah. I mean, this is just a blue-chip name on
• 19:47
  Speaker 5: Wall Street law firms. One of the ways that investment
• 19:50
  Speaker 5: banks keep employees is stock compensation, tie their future to
• 19:56
  Speaker 5: that of the firm. Any structure like that in the
• 20:01
  Speaker 5: legal business?
• 20:03
  Speaker 2: There is currently no structure like that for these large
• 20:06
  Speaker 2: law firms. There are basically rules around who's allowed to
• 20:10
  Speaker 2: own law firms. And right now you have to be
• 20:13
  Speaker 2: a lawyer to own a law firm. There are efforts
• 20:17
  Speaker 2: underway in different sectors of the industry to allow for
• 20:21
  Speaker 2: sort of outside investor to basically own a sort of
• 20:26
  Speaker 2: ancillary services agreement or ancillary services company. Excuse me, I
• 20:32
  Speaker 2: don't know.
• 20:34
  Speaker 8: If you still got me there.
• 20:35
  Speaker 5: Having spent a career on Wall Street, having been through
• 20:37
  Speaker 5: many down cycles, they try to jam these stock-like instruments
• 20:40
  Speaker 5: down your throat instead of cash. The net result is
• 20:46
  Speaker 5: it does tie your loyalty a little bit to that firm.
• 20:49
  Speaker 5: I would think there would be some kind of structure
• 20:51
  Speaker 5: they could think of that would replicate an ownership incentive.
• 20:56
  Speaker 2: I think that will probably be one of the questions
• 20:58
  Speaker 2: going forward. I'm really uncertain if that will work. There's
• 21:02
  Speaker 2: a lot of barriers regulatory-wise in terms of the way
• 21:06
  Speaker 2: lawyers as a profession govern themselves. So far, states have
• 21:12
  Speaker 2: been responding to this sort of increasingly in a protective way.
• 21:18
  Speaker 2: There's concern over the idea of outside investors owning law firms.
• 21:24
  Speaker 2: And while perhaps it could do what you suggest, I
• 21:28
  Speaker 2: think there's other reasons that lawyers are wary of it.
• 21:31
  Speaker 7: So, Roy, while, gosh, what happened here feels like it
• 21:37
  Speaker 7: may have been the way that they managed some of
• 21:40
  Speaker 7: their talent, but are all big law firms at risk
• 21:44
  Speaker 7: of the same thing, their top talent going somewhere else
• 21:47
  Speaker 7: and taking their teams with them and leaving a big
• 21:50
  Speaker 7: void in their existing firm?
• 21:54
  Speaker 2: In theory, yes, all law firms are susceptible to that.
• 21:56
  Speaker 2: And the industry has seen a lot more what they
• 21:59
  Speaker 2: call lateral partner movement between law firms. But at the
• 22:03
  Speaker 2: same time, I think it would be an exaggeration to
• 22:06
  Speaker 2: say that every law firm today is somehow more unstable
• 22:09
  Speaker 2: than it was before. last week. This was a real
• 22:13
  Speaker 2: place with real people making real decisions about their future.
• 22:17
  Speaker 2: It was a human story about disagreements between those people
• 22:21
  Speaker 2: and sort of a sad and tragic story of the
• 22:24
  Speaker 2: way that they kind of failed to collectively pursue those ambitions,
• 22:30
  Speaker 2: I would say.
• 22:31
  Speaker 5: So is this going to set off, this being the
• 22:35
  Speaker 5: shuttering of while, is that going to set off a
• 22:38
  Speaker 5: kind of a feeding frenzy amongst the competitors for talent?
• 22:42
  Speaker 2: Oh, yeah.
• 22:42
  Speaker 6: Oh, yeah.
• 22:43
  Speaker 2: That's well underway. Yeah, that's well underway. I mean, the
• 22:46
  Speaker 2: partners who are at that firm who have clients will
• 22:50
  Speaker 2: find it fairly easy to find roles at competitor firms.
• 22:54
  Speaker 2: This is something law firms do all the time. They
• 22:57
  Speaker 2: take in new talent, they get them strapped up, and
• 22:59
  Speaker 2: the work continues. I mean, even the lawyers who remain
• 23:02
  Speaker 2: at Weill over the next 90 days are working on
• 23:05
  Speaker 2: client matters. There are wild gotcha lawyers, I'm sure, in
• 23:08
  Speaker 2: courtrooms today, meeting with corporate lawyers. The firm goes on
• 23:14
  Speaker 2: as this process continues. At some point, it will be over.
• 23:19
  Speaker 2: But it's a complex thing. But I think the hardest
• 23:25
  Speaker 2: thing will be for the younger associates and, of course,
• 23:28
  Speaker 2: the staff as well. Those people are probably most at risk,
• 23:31
  Speaker 2: most vulnerable here.
• 23:33
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