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Deals outlook 2026: Preparing finance teams for what’s ahead · PwC's accounting podcast

• 0:00
  SPEAKER_02: Thought Leadership from PWC's National Office.
• 0:07
  SPEAKER_01: Hello, and welcome to PWC's Accounting Podcast.
• 0:11
  SPEAKER_01: I'm Heather Horn.
• 0:12
  SPEAKER_01: Today's episode dives into the state of the deals market and what may lay ahead in 2026.
• 0:18
  SPEAKER_01: After several years of volatility, we're finally seeing signs of stabilization, which is reopening the window for companies to buy, sell, and raise capital.
• 0:28
  SPEAKER_01: In this episode, we'll explore the latest trends and share insights on what finance and deals teams can do now to prepare and position themselves to take full advantage of the opportunities ahead.
• 0:42
  SPEAKER_01: Today I'm joined by Mike Bellin, a deals partner here at PWC who also leads our U.S.
• 0:47
  SPEAKER_01: capital markets practice.
• 0:48
  SPEAKER_01: Mike brings deep experience, advice, and clients on accessing the debt and equity markets with a focus on the accounting and financial reporting complexities that may come with the territory.
• 0:58
  SPEAKER_01: So, Mike, thanks for joining me today.
• 1:00
  SPEAKER_00: Thanks for having me back, Heather.
• 1:01
  SPEAKER_00: Good to be here.
• 1:02
  SPEAKER_01: All right.
• 1:02
  SPEAKER_01: So, Mike, let's get straight into it.
• 1:05
  SPEAKER_01: But actually, before we do that, maybe we should level set and why you think listeners should be paying attention to what's going on in the deals market, even if maybe they're not actively looking for a deal.
• 1:16
  SPEAKER_00: Yeah, absolutely, Heather.
• 1:17
  SPEAKER_00: I would say the deals market is often a leading indicator for the broader economy.
• 1:22
  SPEAKER_00: It tells us where capital is flowing, where innovation is accelerating, and how companies are positioning for growth or resilience.
• 1:28
  SPEAKER_00: Right now is a particularly important moment because we're seeing a convergence of factors.
• 1:32
  SPEAKER_00: We're seeing the reopening of the capital markets after a period of volatility, the surge in AI-driven business models in a wave of pent-up demand from companies that delayed transactions over the past several years, including the most recent SEC shutdown.
• 1:48
  SPEAKER_00: Broadly for executives, investors, even employees, what happens in the deals market, whether it's IPOs, MA, or strategic partnerships, it can shape everything from access to capital to talent and competitive positioning.
• 2:01
  SPEAKER_00: The decisions being made today will set the tone for the next cycle of growth and transformation.
• 2:05
  SPEAKER_00: So paying close attention now isn't just about tracking the headlines that we're all reading about.
• 2:09
  SPEAKER_00: It's about understanding the forces that will define the business landscape for years to come.
• 2:14
  SPEAKER_00: As to why they should be focused on the market now, I think two fundamental things have shifted.
• 2:20
  SPEAKER_00: One, predictability is improving.
• 2:23
  SPEAKER_00: Inflation, the last read was fairly tame.
• 2:26
  SPEAKER_00: It's moderating.
• 2:27
  SPEAKER_00: Interest rates are approaching an inflection point, and credit markets haven't reopened, allowing more deals to take place.
• 2:35
  SPEAKER_00: And number two, I'd say corporate urgency is rising.
• 2:38
  SPEAKER_00: We've seen many companies, sponsor back companies, et cetera, all explore value creation activities.
• 2:45
  SPEAKER_00: We've seen many companies that have deferred strategic decisions for years, given the volatility I mentioned, really create pent-up demand for acquisitions, divestures, and IPOs.
• 2:56
  SPEAKER_00: So it's been a very active capital market since we uh kind of leave 25 and go into 26.
• 3:01
  SPEAKER_00: And I would say broadly, this is the first time in a while we can talk about a more normal cycle opening in the capital markets.
• 3:08
  SPEAKER_01: And when you say normal, what's your definition of normal, especially since you said it's been a while.
• 3:14
  SPEAKER_00: So I would say volatility.
• 3:16
  SPEAKER_00: Volatility is much more stable.
• 3:20
  SPEAKER_00: The period of high interest rates that have really put a slowdown in the capital markets, um, we're back to a more normal cycle.
• 3:27
  SPEAKER_00: So hopefully that is normal for the years to come.
• 3:30
  SPEAKER_01: All right.
• 3:31
  SPEAKER_01: Let's see then.
• 3:32
  SPEAKER_01: So then if if kind of with that background and landscape, then as we look ahead for 2026, you know, what where before we do that, where do things stand today?
• 3:43
  SPEAKER_01: Like how where is the market right now?
• 3:46
  SPEAKER_00: We we saw 2025 wrap with 77 traditional IPOs raising about 40 billion in capital.
• 3:53
  SPEAKER_00: And from a mega deal perspective, which PDBC describe defines as over 5 billion in deal value, we saw 74 mega deals, um, 20% of which were AI driven, really drive the market.
• 4:05
  SPEAKER_00: Um, and we haven't seen that type of volume for many years.
• 4:09
  SPEAKER_00: So I would say 25 was a positive, uh, created positive momentum going into 2026.
• 4:16
  SPEAKER_00: It was a call, we had a cautious start, though, to the year.
• 4:18
  SPEAKER_00: We had the ups and downs with tariffs, um, and then most recently with the SEC shutdown, which put many companies that were considering capital market transactions on the sidelines for for over a month.
• 4:30
  SPEAKER_00: So we're starting to see some of that activity come back in play.
• 4:34
  SPEAKER_00: I think in 2025, investors shifted their focus from lofty valuations, discipline growth, profitability, really rewarding companies with strong fundamentals and operational maturity.
• 4:46
  SPEAKER_00: Um, at the same time, we saw the headwinds with the government shutdown that I mentioned, um, pushing out IPOs, slowing down timelines, impacting timelines, both in the IPO perspective, but also from an MA perspective.
• 4:58
  SPEAKER_00: We saw volatility created by tariff and tariff risks.
• 5:02
  SPEAKER_00: And uh we've also seen geopolitical concerns.
• 5:05
  SPEAKER_00: So there are definitely headwinds, despite the optimism that I bring here.
• 5:09
  SPEAKER_00: So I really think the window is reopening.
• 5:12
  SPEAKER_00: It's very selective in the companies that are able to go out and do deals in today's environment.
• 5:19
  SPEAKER_00: It's not wide open, it's selective.
• 5:21
  SPEAKER_01: It's interesting that you talk about the uh government shutdown, and that's something that slowed down deals because I actually thought you were gonna be talking about the fact the SEC is trying to make changes to increase the number of deals.
• 5:33
  SPEAKER_01: And so it's almost like it's ironic in a way that that happened.
• 5:36
  SPEAKER_01: But do we see that the SEC is going to have an impact going forward on spurring the deals market?
• 5:43
  SPEAKER_01: Or are we gonna get into that more when we talk about private equity?
• 5:46
  SPEAKER_01: Or what's your view?
• 5:47
  SPEAKER_00: My view is yes.
• 5:48
  SPEAKER_00: We've heard the SEC chairman um come out and they're looking at a variety of different rule changes uh to create capital raising and being a public company easier, less costly in the U.S.
• 6:02
  SPEAKER_00: So we do expect the SEC to continue to be a tailwind for capital markets on the deal side.
• 6:07
  SPEAKER_00: Um we've seen a lot of regulatory change.
• 6:09
  SPEAKER_00: We've seen changes in in terms of reviewing uh deals that are going through and a quicker review process.
• 6:17
  SPEAKER_00: So I think the the government, the SEC, they're all being very um open to pushing deals forward in the U.S.
• 6:24
  SPEAKER_00: We're seeing a lot of um, I would say more co-cooperative administration here to get deals done.
• 6:31
  SPEAKER_01: All right.
• 6:31
  SPEAKER_01: So it'll be interesting to see then over the next year or so how much additional change we see on that front.
• 6:37
  SPEAKER_01: But when you look at the current market, then what are the key things that you'd say are driving the activity?
• 6:44
  SPEAKER_00: Absolutely.
• 6:44
  SPEAKER_00: There's a few things.
• 6:45
  SPEAKER_00: Number one is the shift towards quality.
• 6:48
  SPEAKER_00: Uh, investors, acquirers, they're prioritizing companies with strong fundamentals, disciplined growth, credible paths to profitability.
• 6:56
  SPEAKER_00: We've seen that surge in large deals and mega deals that I mentioned in sectors like technology, AI infrastructure.
• 7:02
  SPEAKER_00: AI infrastructure was 20% of the mega deals that I mentioned.
• 7:06
  SPEAKER_00: Um, that's where scale and innovation are really rewarded.
• 7:09
  SPEAKER_00: Um, AI has been a major catalyst, not only for those tech companies, but across industries.
• 7:14
  SPEAKER_00: We've seen accelerated product cycles, attraction new capital, creating new MA and IPO opportunities.
• 7:21
  SPEAKER_00: Um, at the same time, the reopening of this IPO window after that period of volatility and regulatory backlog, it's released a pent-up demand for companies that have delayed gone public over the last several years.
• 7:33
  SPEAKER_00: And then the macro factors that uh that we kind of opened with cooling inflation, expectations around rate cuts, tariff stabilization, improved market sentiment, and then the regulatory body around the SEC and some of those rules that may be forthcoming here for us really create a window to continue to shape the timing and the strategy of companies to go out.
• 7:54
  SPEAKER_00: And then finally, uh private capital.
• 7:57
  SPEAKER_00: Private capital is very active in today's market.
• 8:01
  SPEAKER_00: We're seeing late stage funding rounds, we're seeing it really complement secondary transactions, the dual track processes where many companies look at both an MA exit versus an IPO exit to create flexibility in their outcomes.
• 8:16
  SPEAKER_00: Um, it's creating opportunities for financiers and for companies across the uh across the ecosystem.
• 8:22
  SPEAKER_00: So I would say it's it's dynamic, it's selective, um, and really it's really opening up a lot of opportunities for companies.
• 8:29
  SPEAKER_01: All right.
• 8:29
  SPEAKER_01: Well, I want to come back to a few of those points.
• 8:31
  SPEAKER_01: And it's funny, I was almost laughing to myself because I was thinking, oh, Mike, you're so you sound so positive, but I don't think I've ever heard you not sound that positive.
• 8:40
  SPEAKER_01: But this is, I guess, a different type of optimism and positivity compared to the last two years.
• 8:44
  SPEAKER_01: Is that fair?
• 8:45
  SPEAKER_00: I think I think it's fair.
• 8:46
  SPEAKER_00: I think we've seen continued momentum in the IPO market, the deals market.
• 8:50
  SPEAKER_00: It's been growing.
• 8:51
  SPEAKER_00: We saw 77 IPOs last year.
• 8:53
  SPEAKER_00: We saw 62, I believe, in 2024.
• 8:57
  SPEAKER_00: This is a lot of growth, actually.
• 8:58
  SPEAKER_00: It's growth, but it's still well behind a healthy IPO market where we're seeing 100 plus IPOs in the U.S.
• 9:05
  SPEAKER_00: So we do have room to grow.
• 9:06
  SPEAKER_00: I do think all those forces that we discussed, it's all creating those tailwinds to be optimistic in a market like this.
• 9:14
  SPEAKER_00: Um, and then on the MA side, the device share side, the broader deals market, we continue to see private equity being very active in the market.
• 9:22
  SPEAKER_00: At the tail of 2025, we saw a few private equity companies go public and have very successful offerings, which we haven't seen in a while.
• 9:30
  SPEAKER_00: So we expect that momentum to build.
• 9:33
  SPEAKER_00: So it's it's hard for me not to be optimistic about 26, uh, given some of those factors that we've seen.
• 9:39
  SPEAKER_01: All right.
• 9:39
  SPEAKER_01: Well, with that said, then when you look ahead to 2026, what are some of the key factors that you see in the market?
• 9:45
  SPEAKER_00: Um, I think number one, the IPO is opening wider than it's been in several years.
• 9:50
  SPEAKER_00: But like I said, it's not a free-for-all for companies.
• 9:53
  SPEAKER_00: Investors are rewarding companies with the scale, the profitability, the governance.
• 9:58
  SPEAKER_00: AI will continue to be a major catalyst for the IPO market.
• 10:02
  SPEAKER_00: It's not driving activity only in the tech companies, but how are other companies incorporating AI into their operating models, into their stories, and creating value for potential investors?
• 10:12
  SPEAKER_00: If you think about healthcare, you think about energy transition, industrials, all of those companies are still at the early stages of embedding technology into their back office and their front office and how they not only control costs but serve clients.
• 10:26
  SPEAKER_00: So I think that creates a lot of uh tailwinds for the market.
• 10:30
  SPEAKER_00: We continue to see that surge in large deals and the mega deals that I mentioned, especially as companies and sponsors look to capitalize on that pent-up demand and the favorable market conditions from a macro perspective.
• 10:43
  SPEAKER_00: The dual track process where many of these um sponsor-backed companies are looking at both an IPO as well as an MA exit.
• 10:51
  SPEAKER_00: It's creating value, it's creating optionality.
• 10:53
  SPEAKER_00: Um, it's creating a lot of opportunity for those companies to explore uh the best value for them.
• 11:00
  SPEAKER_00: And then the macro factors, like I said, that we have the interest rate cuts, expectations around that.
• 11:05
  SPEAKER_00: Will that develop?
• 11:06
  SPEAKER_00: Will it not?
• 11:07
  SPEAKER_00: There's still concerns around inflation.
• 11:09
  SPEAKER_00: It's been coming down, it seems tamed, but will it remain that way?
• 11:13
  SPEAKER_00: Everything we see in here, we have a strong customer base.
• 11:15
  SPEAKER_00: So when you think about sectors that may be impacted, it seems like a pretty broad sector here could do very well in 2026.
• 11:24
  SPEAKER_00: Um, so I do think there's this it's a significant opportunity uh for anyone in the market, but those who are disciplined, those that are well prepared, those that are ready for the market and a dynamic and heavily changing marketplace, they'll be best positioned to launch their deals at the right time.
• 11:41
  SPEAKER_01: So, Mike, it's interesting because we do still have some political uncertainty with the midterms later in the year.
• 11:47
  SPEAKER_01: There's obviously geopolitical uncertainty.
• 11:50
  SPEAKER_01: And so again, and you mentioned maybe rate cuts, hopefully inflation stabilizing.
• 11:56
  SPEAKER_01: So there is still uncertainty, but big picture with the way things stand right now.
• 12:01
  SPEAKER_01: You don't see that, at least right now, having an impact on the deals market.
• 12:06
  SPEAKER_00: Correct.
• 12:06
  SPEAKER_00: From our the clients that we're talking to and others in the ecosystem, I think there is definitely that optimism for a continued strong deals market.
• 12:15
  SPEAKER_00: There are some things that could take the train off the tracks.
• 12:17
  SPEAKER_00: Geopolitical surprises.
• 12:20
  SPEAKER_00: Um, those those seem to be coming out every month now.
• 12:23
  SPEAKER_00: Like, could anything there really cause volatility for the market?
• 12:27
  SPEAKER_00: Volatility is not friendly for IPOs, it's not friendly for MA activity.
• 12:32
  SPEAKER_00: So geopoliticals is definitely an area that could kind of change that course of optimism that I mentioned.
• 12:39
  SPEAKER_00: Um, if we if inflation comes back, um, that is a big risk for the market.
• 12:44
  SPEAKER_00: I know everyone watches that closely as that as those metrics come out.
• 12:48
  SPEAKER_00: Um so there's definitely risks ahead for the market.
• 12:52
  SPEAKER_01: And so this is a small sidetrack, but it fits into the bigger picture.
• 12:56
  SPEAKER_01: So when you do see, let's say something unexpected happens to the market, which we saw several things over the past few years, then our companies that are far along in a deal or an IPO, they hold, they keep going.
• 13:09
  SPEAKER_01: I obviously it depends on facts and circumstances, but are do we have a lot of deals that kind of got held up that now are you keep saying pent-up demand?
• 13:17
  SPEAKER_01: That's part of what's driving what's going on now.
• 13:20
  SPEAKER_00: That's exactly right.
• 13:21
  SPEAKER_00: We from the SEC, I think they mentioned there was 900 companies, 900 documents in the backlog that had to be reviewed as the government shut down.
• 13:30
  SPEAKER_00: Um, those are not all IPOs.
• 13:32
  SPEAKER_00: Some of those maybe spins, secondary offerings, et cetera.
• 13:36
  SPEAKER_00: DET offerings.
• 13:37
  SPEAKER_00: But from our pipeline, there's well over 200 companies that are looking to potentially launch IPOs in the future.
• 13:44
  SPEAKER_00: So I think there's a there's a huge backlog there.
• 13:48
  SPEAKER_00: Um on the MA front, it definitely slowed down some of the pre-clearances that were out there around deals and some of the rules and decisions that had to be done around some of the MA activities.
• 14:00
  SPEAKER_00: So all that really just gets pushed into 2026 and creates a deeper pipeline there.
• 14:05
  SPEAKER_00: So I think there's a significant backlog that we're gonna see come out here.
• 14:11
  SPEAKER_01: So then specifically on the MA side, what are some of the trends that you're seeing?
• 14:15
  SPEAKER_00: Yeah, I think for MA in 2026, I expect a few clear themes to stand out.
• 14:21
  SPEAKER_00: One is AI will remain a dominant catalyst, both as a sector as well as the owner as a value driver across industries as they adopt new technologies.
• 14:31
  SPEAKER_00: We'll see acquirers targeting companies that can accelerate that digital transformation, unlock data-driven efficiencies, and provide critical infrastructure for the AI activity.
• 14:42
  SPEAKER_00: Second, and Heather, you mentioned this, the government and the regulatory scrutiny.
• 14:46
  SPEAKER_00: Um, you know, we have an administration in place today that is looking to make, again, I'll say it, IPOs great again in America, uh, looking to ease some of the burden of the financial reporting that is taking place for many public companies.
• 15:00
  SPEAKER_00: A good example of that is quarterly reporting.
• 15:03
  SPEAKER_00: Will that go away?
• 15:04
  SPEAKER_00: Will it be optional?
• 15:06
  SPEAKER_00: Um, we've seen private issuers today do very well when quarterly reporting is optional.
• 15:12
  SPEAKER_00: So I think that government intervention and the regulatory scrutiny um will be uh, again, another tailwind for the market.
• 15:20
  SPEAKER_00: And then I think finally, specialization will be key.
• 15:23
  SPEAKER_00: Competition for quality assets is intensifying, especially in that middle market, which is a big part of the MA market.
• 15:32
  SPEAKER_00: Buyers are focused on sector expertise, the value creation playbooks uh that can be brought.
• 15:37
  SPEAKER_00: Um, so I do think that's going to create a lot of um deal making as we go into 2026.
• 15:43
  SPEAKER_00: And then maybe one final item, too, is we've been talking about IPOs, we've been talking about MA and investors, but other structures may come into play.
• 15:53
  SPEAKER_00: Partnerships, collaboration, minority investments, seller financing, all of those are creating traction uh for buyers in a market like this when there is still some risk that is out there for many companies.
• 16:06
  SPEAKER_01: Well, and then you've mentioned private equity a few times.
• 16:09
  SPEAKER_01: So how does that fit into this picture then?
• 16:12
  SPEAKER_00: Absolutely.
• 16:12
  SPEAKER_00: I mean, private equity, they've been quieter than in years past uh during the 24 IPO market, in the 24 IPO market and the 25 IPO market.
• 16:23
  SPEAKER_00: As we talk to sponsors, many of them are prepping their portfolio companies uh for an exit.
• 16:29
  SPEAKER_00: That could be an IPO, uh, could be a sell side process, but that optionality that they're creating to create value in the organization, to get the company ready, to ensure the key metrics are there for these organizations.
• 16:41
  SPEAKER_00: I think it all shows that private equity sponsors are poised to play a pivotal role in the 26 deals environment.
• 16:49
  SPEAKER_00: On the buy side, they still have record amounts of dry capital on uh dry powder on the sideline, uh, which could be a very active market if there are some value plays out there.
• 17:00
  SPEAKER_00: Um, and we've seen that private equity firms getting more creative with those deal structures, the minority investments that I mentioned, partnerships, and a lot of the structured secondaries that they're doing, it creates a lot of value for their operating companies.
• 17:14
  SPEAKER_00: Um, and then again, the regulatory scrutiny, will it be there?
• 17:18
  SPEAKER_00: Will it not be there in 2026 as we go forward?
• 17:22
  SPEAKER_00: Um, we have seen deals go through uh the process much quicker than than in years past.
• 17:28
  SPEAKER_00: So I think there are some some opportunities for companies to uh to be agile around deal making in the private equity space.
• 17:35
  SPEAKER_01: Okay, so we talked about MA, we talked about private equity.
• 17:38
  SPEAKER_01: So now let's go to capital markets and specifically you've we've keep touching on IPOs.
• 17:45
  SPEAKER_01: Do you want to make a prediction?
• 17:46
  SPEAKER_01: How many, or what would you like to tell me about IPOs for 2026?
• 17:50
  SPEAKER_00: I I'm hopeful there'll be more IPOs than the 77 traditional IPOs that we saw in in 2025.
• 17:56
  SPEAKER_00: And I think everything that we discussed really creates that momentum for a strong IPO market in 26.
• 18:04
  SPEAKER_00: Uh, number one, the pipeline that we discussed.
• 18:06
  SPEAKER_00: The deep, there's there's over 700 unicorns in the US.
• 18:10
  SPEAKER_00: Um, many of those companies, you know, the the retail investors, the investing public would love to get their hands on.
• 18:16
  SPEAKER_00: So that creates opportunity for many, many companies.
• 18:20
  SPEAKER_00: Um, the the SEC shut down at the end of 2025.
• 18:24
  SPEAKER_00: Again, it pushed a lot of IPOs that would have taken place in late 2025 into 2026.
• 18:31
  SPEAKER_00: Many of those companies now are waiting for their year-end results to drop those into their S1 filings, et cetera.
• 18:38
  SPEAKER_00: So I do think in the later in Q1 here and into Q2, we'll continue to see good momentum and probably more companies look to flip documents publicly and go on the road for the for the roadshow.
• 18:50
  SPEAKER_00: Um, but I but at the end of the day, I do I do think the quality will define the outcomes.
• 18:54
  SPEAKER_00: Investors today on the buy side are rewarding scaled businesses with disciplined operating models, credible profitability stories.
• 19:01
  SPEAKER_00: Um, those really are an AI infrastructure and software platforms, and even the insurance businesses, which are steady cash flows, those have done very well in this IPO market.
• 19:12
  SPEAKER_00: So I would say, yes, the IPO window is open, but it's not wide open.
• 19:17
  SPEAKER_00: And those companies that are ready to operate as public companies that have been demonstrating the durable growth, uh, they'll they'll have the ability to convert that pent-up demand um into strong aftermarket performance.
• 19:28
  SPEAKER_01: So you referenced unicorns.
• 19:30
  SPEAKER_01: And for people who aren't in the deals market and maybe aren't keeping up on that, what specifically are you referencing there?
• 19:36
  SPEAKER_01: And then what would lead one of those types of companies to decide, okay, now is the time for an IPO?
• 19:43
  SPEAKER_00: Yeah, absolutely.
• 19:44
  SPEAKER_00: Um unicorns typically defined as companies with over a$1 billion valuation.
• 19:50
  SPEAKER_00: Many of those companies are fast growing companies.
• 19:53
  SPEAKER_00: So when you think of the key attributes of what a successful IPO company could be, many of them tick the box.
• 19:58
  SPEAKER_00: They have strong revenues growth, uh, they're they're gaining towards profitability, key metrics which are really typical in many of these companies, like ARR growth, uh low churn rates, uh, new business models, uh, attractive TAMs, total addressable markets, all of that creates a company that could be a very uh well-positioned company for the IPO markets.
• 20:23
  SPEAKER_01: And then this is probably an entire series of podcasts, but just on a very brief basis, what would lead that type of company to choose to go down an IPO path versus just doing more, you know, private investment?
• 20:35
  SPEAKER_00: It's a great question.
• 20:36
  SPEAKER_00: And in today's market, we've seen companies stay private for longer, given the abundance of capital in the private markets, uh, given the rise of more secondary transactions, which can create employee liquidity in many of the private companies.
• 20:51
  SPEAKER_00: Uh, but ultimately the public markets allow uh companies not only to raise capital, to build their operating platforms and expand, but also gives them that currency, the acquisition currency of having the publicly traded stock that they can go out and further do deals, do further tuck-ins, um, really attract talent to their organizations through the through um having the publicly traded equity.
• 21:13
  SPEAKER_01: All right, that's helpful.
• 21:14
  SPEAKER_01: So then if we look at the market as well, what sectors would you say that you're expecting to see over, you know, to kind of lead the charge this year?
• 21:23
  SPEAKER_00: Yeah, I I I've mentioned it a few times.
• 21:25
  SPEAKER_00: Um, AI, AI infrastructure may sound like a broken record with the market, but we see continued momentum there.
• 21:33
  SPEAKER_00: And and really, as you look across the ecosystem of companies, many companies are still early in their journeys of adopting AI and building AI, not only to benefit back office but front office activities.
• 21:46
  SPEAKER_00: Um, enterprise software is embedding AI into everything they're doing, creating stronger operating models and uh, I would say more nimble software for clients to build.
• 21:57
  SPEAKER_00: So we expect anyone touching the broad AI.
• 22:00
  SPEAKER_00: Ecosystem to be in position to do an IPO in 2026.
• 22:06
  SPEAKER_00: You think about that broad ecosystem, the energy needed behind it, the infrastructure, the building, all that's going to create opportunities for companies in energy and in construction and some of these new businesses of providing electrons to these organizations.
• 22:22
  SPEAKER_00: It creates momentum for those organizations.
• 22:25
  SPEAKER_00: Digital assets, we've seen the government, the regulatory body be more accepting of digital asset companies.
• 22:33
  SPEAKER_00: So we continue to expect more companies to explore the capital markets.
• 22:38
  SPEAKER_00: And then maybe finally, um, aerospace defense slash tech slash space.
• 22:42
  SPEAKER_00: I don't know how to define it better than that given the crossover.
• 22:46
  SPEAKER_00: We've seen many successful companies uh go public in 2025 in that sector.
• 22:51
  SPEAKER_00: And as we look forward into 2026 and the race, the new race for space, I would say, to put up data centers in space to uh for defense purposes in space, there's many um very creative business models and many proactive companies in those sectors that are being very well positioned for a public offering.
• 23:12
  SPEAKER_00: So I do think it's a broad base sector-wise, which to me always points to a very healthy, healthy market.
• 23:19
  SPEAKER_01: And then you mentioned early on sort of macro conditions like uh interest rates, inflation rates, and obviously that's a very unpredictable factor here.
• 23:28
  SPEAKER_01: So, how will that play into what's going on from a market perspective?
• 23:33
  SPEAKER_00: Yeah, absolutely.
• 23:34
  SPEAKER_00: Macro conditions, especially the interest rates and inflation that you mentioned are absolutely central to sustaining the IPO momentum into 2026.
• 23:42
  SPEAKER_00: The moderating inflation that we've seen, the anticipation for one or two more cuts, maybe has improved market sentiment and really created less volatility.
• 23:53
  SPEAKER_00: Um, really centered around the lowered cost of capital, makes it easier for companies to forecast growth, forecast profitability.
• 23:59
  SPEAKER_00: And that's a big reason why we're seeing a broader, more robust IPO pipeline heading into the new year.
• 24:05
  SPEAKER_00: Um, if rates continue to normalize, if that inflation remains in check, investor appetite for new offerings should stay strong, especially for high quality, well-prepared companies.
• 24:16
  SPEAKER_00: When the when the cost of capital goes down, um the risk appetite may go up for that.
• 24:21
  SPEAKER_00: So that an IPOs being a riskier asset, it may create crank of demand.
• 24:26
  SPEAKER_00: But there are there are headwinds, the geopolitical, the geopolitics that you mentioned, global friction that we may or may not see more of as the year uh goes along.
• 24:36
  SPEAKER_00: All of that creates volatility and for for IPOs, especially of volatile markets make it very hard to price IPOs.
• 24:45
  SPEAKER_01: And so again, I I kind of asked this before, but let's say you're getting ready to price, you hit that point of volatility.
• 24:51
  SPEAKER_01: Does it just wait a few weeks?
• 24:52
  SPEAKER_01: Or it it just it really depends.
• 24:54
  SPEAKER_00: It really depends.
• 24:55
  SPEAKER_01: I wish people could see your face.
• 24:58
  SPEAKER_00: It really depends.
• 24:59
  SPEAKER_00: We get that question a lot, but it really depends.
• 25:02
  SPEAKER_00: Companies that may be not impacted about whatever that market event may be, yeah, they may push along and they may look to get out.
• 25:09
  SPEAKER_00: Other companies, depending on what that disruption is, may look to pause and may look to pull back and wait, wait it out a little bit and see how things do develop in the marketplace.
• 25:20
  SPEAKER_00: So it's really uh I think it's really a company-centric question.
• 25:24
  SPEAKER_01: Yeah, and obviously I keep tempering your enthusiasm.
• 25:27
  SPEAKER_01: I don't mean to do that.
• 25:28
  SPEAKER_01: But with that said, then, Mike, so I'm a company, I'm listening, I've been thinking, what should I do?
• 25:34
  SPEAKER_01: And if you know, if we think about our listeners, it's probably more people on the CAO side and the controller side.
• 25:40
  SPEAKER_01: But what what are you recommending to companies right now then as they're looking out at this landscape?
• 25:46
  SPEAKER_01: And seems like there's obviously a lot of different strategies companies can be taking.
• 25:51
  SPEAKER_01: So, how do you best position yourself and broadly, and then maybe if there's some specifics for the controller or their team?
• 25:58
  SPEAKER_00: Yeah, absolutely.
• 25:59
  SPEAKER_00: I think broadly speaking, whether a company is considering IPO, MA, divest your activity, a few concrete steps is to one, refresh the portfolio.
• 26:09
  SPEAKER_00: Look at your organization, look at your business.
• 26:11
  SPEAKER_00: How are you creating value for your investors, for your owners?
• 26:15
  SPEAKER_00: And are there any assets that maybe not core to your business that you can think about spinning off, selling, divesting to create a stronger business model for yourself?
• 26:24
  SPEAKER_00: Um, I always suggest to companies to pressure test their investment thesis.
• 26:29
  SPEAKER_00: Uh, when you think about reporting to your board or what's your future equity story to sell the company, whether it be an MA exit or an IPO exit, how are you gonna respond to questions like how does AI, your cost structure, or potential regulatory change or geopolitical changes impact your business model?
• 26:46
  SPEAKER_00: Are you ready for those types of questions?
• 26:50
  SPEAKER_00: Um, strengthening the balance sheet.
• 26:51
  SPEAKER_00: We've seen with the volatility over the years, companies with strong balance sheets continue to do well, operate well, and really create their own opportunities as the market fluctuates.
• 27:01
  SPEAKER_00: So anyone that can strengthen the balance sheet in a time like this is key.
• 27:05
  SPEAKER_00: And then finally, just enhancing your diligence readiness.
• 27:08
  SPEAKER_00: Whether you're looking at an IPO, an MA, exit, et cetera, diligence will be done.
• 27:14
  SPEAKER_00: The better prepared a company is to respond to questions, to inquiries, to have good data, good clean data will be well positioned.
• 27:22
  SPEAKER_00: And as I think about the CAOs, the controllership, um, really strengthen your financial foundation.
• 27:27
  SPEAKER_00: Get the right audits done by the right firms over the right periods.
• 27:32
  SPEAKER_00: Um, make sure that's all in line.
• 27:34
  SPEAKER_00: Again, going back to that diligence, build the right team of advisors around you to prepare you for that diligence exercise, the sell side, the IPO prep that may be needed, the IPO um and getting, again, the right audits done for the right entity is key.
• 27:53
  SPEAKER_00: Building the team around you, your CFO, your CLO, other components, your board, you know, a lot of that recruiting process can take months at a time.
• 28:02
  SPEAKER_00: So starting that early in the year is absolutely critical.
• 28:07
  SPEAKER_00: And then finally, um, for the for anyone in an organization, how do you tell your compelling equity story?
• 28:13
  SPEAKER_00: Investors want clarity on your growth drivers, your profitability path, and your resilience in what could be a volatile market.
• 28:21
  SPEAKER_00: So that narrative should be reinforced by by data, by key metrics of the organization.
• 28:25
  SPEAKER_00: So again, having good, clean data is critical for anyone thinking about a transaction in 2026.
• 28:32
  SPEAKER_01: Yeah, it's interesting.
• 28:33
  SPEAKER_01: I want to come back to the equity story, but if I put myself, if I think about the controllers organization or the CAO, in the end, they own the data.
• 28:42
  SPEAKER_01: And so they really are the ones that want to make sure they're ready to go and understand what the company may be thinking about so that you aren't caught by surprise when someone says, okay, let's move forward.
• 28:53
  SPEAKER_01: And all of a sudden you're like, well, wait, that part of the business isn't ready.
• 28:56
  SPEAKER_01: Or I don't have the right controls in place or otherwise.
• 28:59
  SPEAKER_01: There's actually quite a lot they, you know, some of what you talked about, they can't control, but there's a lot here that really is in their control.
• 29:06
  SPEAKER_00: Absolutely.
• 29:07
  SPEAKER_00: And that's why we always tell the controller, the CAOs, the CFOs to start early, start early in the process because the companies that invest in that readiness today are the ones that are creating or really converting that opportunity to value when the market accelerates and they have these opportunities.
• 29:22
  SPEAKER_00: When you think about the data and the prep, a lot of it comes down to financial systems and how good are your financial systems?
• 29:29
  SPEAKER_00: What controls and processes do you have to get the good data out of your systems quickly?
• 29:34
  SPEAKER_00: So when someone is coming in and asking questions around your business, you can respond to those questions uh very efficiently and effectively.
• 29:42
  SPEAKER_00: And and key metrics, we we keep talking about key metrics, making sure you have the right data that is consistently prepared and has the right controls around it over, you know, not only today's numbers, but as you look back in time and prepare comparative numbers for the prior years, making sure that you do have those controls and processes.
• 30:01
  SPEAKER_00: And a lot of that comes down to the shoulders of the controller and the CAO and their broader teams to make sure that data is there and it's clean, it's auditable, it's traceable.
• 30:11
  SPEAKER_00: Um, someone can get very comfortable with it.
• 30:13
  SPEAKER_00: So I think the controller and the controller, the CAO and their organizations are absolutely critical in creating a company that is exit readiness, exit ready, and really creating that operational maturity from a financial perspective with these organizations.
• 30:28
  SPEAKER_01: Yeah, it's almost like you say start early.
• 30:30
  SPEAKER_01: It's almost like you don't actually even need to start early.
• 30:33
  SPEAKER_01: You just need to be ready because you don't need to know that your company is looking for a transaction or looking for an exit or looking for a spin or any of these things.
• 30:42
  SPEAKER_01: You just want to be in a position that you have like a well-run organization with good clean data.
• 30:48
  SPEAKER_00: Absolutely.
• 30:48
  SPEAKER_00: Yeah.
• 30:49
  SPEAKER_00: Companies that are operating like a public company today, a best in class organization, closing their books on a timely basis, getting good data, preparing strong reports for their board, for their executives.
• 31:03
  SPEAKER_00: Those companies that are operating like that, this is just, you know, that when you go through a transaction, whether it's an IPO, whether it's an MA event, a devastature, you're ready for it.
• 31:14
  SPEAKER_00: You've built the DNA in the organization.
• 31:16
  SPEAKER_00: So it's almost second nature for you when this comes up.
• 31:19
  SPEAKER_00: It's not a surprise.
• 31:21
  SPEAKER_00: Um, it's not a scramble.
• 31:22
  SPEAKER_00: And, you know, a scramble can create uh complexity, can complete, can draw errors for an organization, uh, can bring undue stress and really can drive um value, I would say deflation in in an event.
• 31:35
  SPEAKER_01: So yeah, or holdups or otherwise, you don't want to be the one responsible for that.
• 31:39
  SPEAKER_01: But so let me go back because you use sort of equity story that always piques my interest.
• 31:43
  SPEAKER_01: So now let's assume you've got this well-run organization, all your good data, but the company itself then is trying to think of this equity story.
• 31:52
  SPEAKER_01: What do you mean when you're talking about that?
• 31:54
  SPEAKER_00: When when I talk about equity story, I really think about what is the value proposition for the organization?
• 32:00
  SPEAKER_00: How are they creating value for an investor?
• 32:03
  SPEAKER_00: Why should an investor put a dollar into their company versus another company that they have access to?
• 32:08
  SPEAKER_00: Um, and in today's world, it really comes down to I think efficiencies, growth, to leveraging capital appropriately and really having that path to uh continued success and market grabbing more market share uh than your competitors.
• 32:25
  SPEAKER_00: So I so it starts early with the key metrics and showing the growth levers in the organization.
• 32:31
  SPEAKER_00: Um I think it in today's world that profitability or the path to profitability is a critical factor for anyone considering the equity story.
• 32:41
  SPEAKER_00: Um and it's really how resilient are you to competitors?
• 32:44
  SPEAKER_00: What is your competitive moat in the marketplace that's gonna allow you to grow and really um ward off any competition coming to take part of your market so you continue to grow and be a good company?
• 32:57
  SPEAKER_00: And then finally, when you have new capital coming into the organization, how do you expect to use that?
• 33:03
  SPEAKER_00: How are you gonna put that capital to work that generates a great return for those investors?
• 33:09
  SPEAKER_00: Is that through continued marketing, continued growth of customers?
• 33:12
  SPEAKER_00: Is that gonna be through tucking acquisitions, through building out technology levers for your for your organization?
• 33:18
  SPEAKER_00: There's many different ways that you can use that, but how are you gonna make sure that that return is really clear and evident?
• 33:24
  SPEAKER_00: And your track record proves that to the investor there too.
• 33:28
  SPEAKER_00: So the equity story is really a compelling story, but I I boil it down to why should someone invest a dollar in you today versus anyone else?
• 33:36
  SPEAKER_01: Oh, the good summary there.
• 33:37
  SPEAKER_01: So then, Mike, we talked about this idea of being sort of always ready, but assuming that's not the case for most companies or all companies.
• 33:44
  SPEAKER_01: What is then a realistic timeline if someone is looking ahead and looking into the market of how quickly you can do a deal and how long it will take to get ready?
• 33:54
  SPEAKER_00: Yeah, I would say every company is different, every deal is different, but the the goalposts that we typically set out are 12 to 24 months prior to a transaction.
• 34:04
  SPEAKER_00: A company wants to start thinking about readiness.
• 34:07
  SPEAKER_00: And that often starts with either a diligence exercise or an IPO readiness exercise.
• 34:12
  SPEAKER_00: And it may give affirmation that many of their functional areas are really in a good state.
• 34:17
  SPEAKER_00: If they've been preparing for this, then they've really been focused on this.
• 34:20
  SPEAKER_00: Uh, other areas that it may shed light on, there's a lot more work to do, and there's a lot more people, processes, systems to bring into the organization.
• 34:28
  SPEAKER_00: So that 12 to 24 months really provides a great timeline for companies not only to rectify any issues or gaps that may exist today, but it really allows them to build the processes that create an effective organization, bring in the right people uh with the right experience to the organization, and really put controls around the whole process.
• 34:52
  SPEAKER_00: Um, and then you when you get to the transaction, you're talking to potential buyers, you're talking to the bankers on your IPO, you're showed up and you're operating like an effectively public company.
• 35:03
  SPEAKER_00: Again, you're getting them the data that they want to help you tell the story.
• 35:07
  SPEAKER_00: They're getting you, you're getting them the data that they want for their diligence and their synergy exercises.
• 35:13
  SPEAKER_00: So that early start in a process like this is absolutely critical.
• 35:17
  SPEAKER_00: And I think you can really define a successful deal versus a non-successful deal.
• 35:22
  SPEAKER_01: All right.
• 35:22
  SPEAKER_01: So it's definitely a lot for companies to think about.
• 35:25
  SPEAKER_01: If you then we're going to summarize sort of all we talked about today, other than the fact that looking ahead, you know, it looks like it's a good market.
• 35:34
  SPEAKER_01: With that said, then what advice are you really giving here?
• 35:38
  SPEAKER_00: I think if there's one thing I'd emphasize, it's the importance of the readiness and the discipline across an organization.
• 35:45
  SPEAKER_00: Whether you're considering an IPO, an MA transaction, or just simply navigating a fast-changing marketplace.
• 35:53
  SPEAKER_00: Uh, companies that invest early in building strong fundamentals, such as financial controls, the governance, the equity story, the accounting practices that we mentioned, are typically the ones that are best positioned to seize opportunities when they arise.
• 36:07
  SPEAKER_00: So don't wait for the window to start opening.
• 36:10
  SPEAKER_00: Prepare.
• 36:10
  SPEAKER_00: Treat readiness, treat that exercise as ongoing discipline and build that DNA in the organization.
• 36:17
  SPEAKER_00: And really, in a selective environment, substance and preparation will always win out over the hype.
• 36:22
  SPEAKER_01: All right.
• 36:22
  SPEAKER_01: Well, that is probably a good note to end on.
• 36:24
  SPEAKER_01: As always, Mike, it's such a pleasure to talk to you, to hear all your enthusiasm for these markets.
• 36:29
  SPEAKER_01: And I look forward to regrouping at the end of the year to see how your prediction did.
• 36:33
  SPEAKER_01: So thanks again for joining me today.
• 36:34
  SPEAKER_00: Thanks for having me, Heather.
• 36:36
  SPEAKER_01: That's our show for today.
• 36:38
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• 36:41
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• 36:44
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• 36:58
  SPEAKER_01: From Thought Leadership at PWC, I'm Heather Horn.
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