Future Outlook for Global Firms

Attention all passengers. The Uber ride for Jeff's rugby team will depart in five minutes from platform 15. Your ride comes with six toilets and a refreshments carriage that you'll empty within five minut es. Thank you for poking your tickets on Uber . Private equity industry is going through some growing pains. Buyout firms have had a great multi decade run, accumulating assets, scooping up ever larger targets around the world with the helps of lashings of debt, collecting lucrative fees, and pushing into related areas like infrastructure and real estate and private credit. This has won them many envious admirers in the financial industry and many critics in the broader world. Now the problems are piling up. Private equity investors are sitting on large investments that they're struggling to offload. Software buyouts are under threat from artificial intelligence. And mom-and-pop investors are rushing to pull their funds from private credit vehicles. So it's a good moment to ask, what's next for private equity? That's the question we're going to address on the Big View this week. It's what we do, Royce's Breaking Views. We tap our best sources around the world for fresh insights into the biggest stories in finance, business, and economics. I'm your host, Peter Thalarson . Our guest this week runs one of those firms. David Gross is managing partner of Bain Capital, which has two hundred and twenty-five billion dollars under management across private equity, credit, and other asset classes. As his title suggests, Bain is still a private partnership, unlike rivals like Blackstone and KKR. David joined Bain Capital in two thousand and was a founding member of its Asian business, launching its Tokyo office in two thousand six. But before we hear from David, I'm joined by Jonathan Guilford, Breakview's US editor and one of our resident private equity watchers. Welcome, Jonathan. Hey Peter, good to be here. So Jonathan, you've been observing and writing about the trava ils of all these private equity firms, or what we now call alternative asset managers for a while. What are some of the big questions that you want to get into? Well, it's impossible to talk about this right now without talking about the big freak out about private credit that's happening. So all of these buyout firms have grown like, you said, into these sprawling asset managers that go across asset classes. Big part of that was the jump into non bank lending, huge boom over the past few years, and key to that boom was packaging these investments up into vehicles that were then sold to kind of mom and pop, individual, still affluent but individual investors. And now we're in a period of deep and intense worry. People are beginning to think, oh no, was there overheated lending that happened during the 21-22 cycle. People are beginning to withdraw their funds from those vehicles. And we're going to probably start seeing from here on out that what the favorite industry term of art, dispersion. We're going to start seeing some of the big folks manage to weather this storm and some folks who are less well attuned to this begin to kind of struggle and pull back. So so what makes um David Gross a good person to to address all this?aron Powell Well, David is interesting because Bain is, as you mentioned, a firm that goes a little bit against the flow of what we've seen elsewhere. So starting with, I think it was Fortress back in the 2000s and then Blackstone and others, a lot of these big firms went public. And af after a few years on the market, they figured out, okay, what public investors love are these steady management fees that are like an annuity that we draw off from these funds. And they started optimizing for that, and they grew to enormous size. Their valuation multiples exploded heading into like the early 2020s. And Bain kind of resolutely stood apart from that. And I think David has a really interesting perspective, therefore, that's kind of insider in the industry, because Bain is, for everything else, a very large and very story private equity firm, but also a bit on the outside because they stand apart from that kind of set of public market pressures.. Yes And of course, Jonathan, you've been uh such a seasoned watcher of of this industry and of Bane Capital that you actually interviewed John Connerton of Bain Capital a couple of years ago, and John was uh uh managing partner alongside David for a bit um until uh until David uh stepped up to um uh to to to take sole charge um recently. Um we'll put a link to that discussion in the show notes so uh uh if you want to compare the two, uh then you can do so. But for now, without further ado, let's listen to the discussion. David, thank you for taking the time amid all this to join me on the big view. You're welcome. Thanks. It's great to be here, Jonathan. So David, it's been about five months since you became Bain's sole managing partner. And first, want to just say congratulations. Uh, and second, uh, condolences on stepping up at what we might euphemistically call an interesting time for the industry. Well, thanks to Jonathan. Really more for the congratulations. I'm excited. You know, one must always be a little bit daunted with the interesting environment, interesting times that you referenced that we we live in. But um when when you step way back, right, you know, we're actually quite fortunate. We are we sit uh in in this kind of scrolling vortex, but the vortex is moving up and to the right. Right. I mean, what surrounds so much of our industry and the forces that shape it um is growth. Uh, you know, recall we're in a still a pretty early phase for the penetration of private market s. Uh for all the the talk of uh of capital and new new types of capital coming in. It's good to have capital uh come into the industry. It's seeking something that uh one would say is positive. It's uh it's it's worse to to not have uh people interested in in buying your products. Um and you know even the macro and geopolitical landscape which is is uh is dizzying, um, really does create opportunities for us because we're we're we're private, because we are uh patient and and we look through uh long-term cycles and because we can capitalize on dislocation and there's plenty of dislocation there in. So, you know, without uh being too uh optimistic about um a real set of challenges, and I'm sure we'll talk about those, um, I I try to remind people that you know we're we're we're sitting in an area of of pretty interesting growth. Right. And you touched on a couple of things that I think are interesting to revisit because I know back when I spoke with John a couple of years back, the operative question for me was just sort of like what is private equity now? Because like you said, up and to the right, we had seen this breakneck expansion into lending, into ever bigger buyout funds, and also like a bunch of tie-ups that brought in access to vast pools of capital held by insurers or the rise of retail products. Uh and the bottom line of that seemed to be first, like you said, super, super breakneck growth, scale just exploding. And also, I think you see really at the public listed managers, they enjoyed a huge tailwind from just like fees, fees, fees. Like these these products and these structures like really printed a lot of fees. And I wonder, I'm curious as to whether you think this is too reductive, but sitting here looking at what we've been through over the past few weeks and months , it feels like the explosion in scale is sort of at the root of what everyone's talking about, maybe worried about right now, which is like, was there such a rush of capital that you saw overheated activity, especially on the lending side, and was that packaged up into products that now maybe are just going through a bit of indigestion with retail buyers who, like, frankly, you know, they tend to be pretty momentum driven, right? So listen, I think there's there is some truth to what you've what you've stated. Um again, we start with the fact that there there was a lot of capital coming in to say um, you know, this this form of alternative investing is is a is a good thing. It's part of a of a asset allocation that one should have. And previously there was not as much access. There's also just been a lot of growth in capital. So we're we're coming out of a um almost now multi-decade, you know, you know, bull market run, followed by high interest rates. If you have savings, that's good. So there's a lot of compounded wealth that's been created. And there's been some deregulation as as we know to allow that to come into to private. So a lot has happened um all at once. And so there's probably a few things. One is just that it's new and it's early. And you know the product to align all those goals is still in the process of being formed. And that has to do with the return of that product, how it's bought and sold, how investors are educated about that product. Ultimately, how you deliver on those returns will be, by the way, the most important thing. But right now we're just talking about almost the hope and expectation of returns and how that seems like it's going in any short moment because it's only been around for um a couple of years. So that's that's one thing. The second thing you noted though is this pursuit of scale and of volume. And I do think that the industry has stratified and you have players that have gone public and because the public market, you know, values the stream of fee income more than it does performance income, it's not surprising that to serve those shareholders, many have pursued pursued this growth and and ag asset aggregation uh model. And that's, you know, kind of like a fuel. So when the spigots on and it's working and there's a flywheel there, I think you you kind of keep you kind of keep going with it. Others are taking different shots. You know, we I'll you know, assert that ours is a little bit distinct because we like the multi-asset class approach and the ability to have diversification to give a lot of opportunities, different ways to experience the bang capital product to our investors across asset classes. There are other specialized players that are that are also focused on performance, but they're much, much more, more narrow. And so we've tried to occupy, you know, a space that participates in some of those trends, but really stays anchored in generating long-term investment returns. And then we think a lot about, okay, what are the levers? What are the capabilities you need to generate those so you can do it through cycles? And when markets get a little exuberant or when they're getting, you know, dislocated , that you still pretty much have the same model to show to shine through. And so that's the way we try to stay um anchored. But you know, if you extend it out, I think there is this uh push for aggregation and scale such that some are focused much more, as you said, on distribution, um, on on manufacturing products and distributing those uh at volume. And um, you know, I a little bit liken it to um the old telecom, you know, uh days and the analogy when you had telecom pipes that were getting fatter and fatter, and there was a big push to try to drive as much, you know, bandwidth through a pipe as you could. And then there were people who had the content. And you know , we were all worried about things back then, and there was right to be worried about the long-term returns and sustainability of the pipes. But if the content is really good content and you're focusing on and you can see the analogy, generating really great long-term returns is the content here, that should be a pretty defensible model. But you got to recognize that there are people playing at this at different with different goals. Right. It's funny that you come up with that analogy because I remember back when I was looking at you look at something that really, really marks this period, right? And I think of like BlackRock buying HPS and and various other folks kind of really expanding it to privates. Cause like really to bring it down to concretely what we're talking about, right? You have an industry that started off as private equity, which was really quite a rarefied asset class access to that asset like you're talking about was kind of limited to largely on the institutional side, there was some retail access, but it was through feed of funds and all these kind of awkward things that have all these kind of just like annoying little things about them that made them a bit more difficult to just sell to a mass market. Yeah. And now we have business development companies, we have all these various structures that allow wealth managers and so on to sell like a pretty like portable, pretty easily understandable and grokkable product. And I think there was a moment of freak out when everybody um in like public markets investing was worried, like, oh my goodness, you know, we thought we had like this differentiator where we had like mass access to this huge pool of investors. Now the private guys are coming along and they've figured out how to crack that. then And you get like this scramble over the kind of distribution channel, right? Is that kind of kind of what you're what you're getting at? You see, you see evidence of that, but I'm glad you brought up kind of like the origins of private equity in the industry, because sometimes I think we have to like go back to the basics of what this was all about, right? Because in the beginning it was definitely not about distribution. And honestly, capital wasn't really the driver of the business. The driver was sourcing advantage. Can you find and create the most interesting deal situations that no one in the public market could would ever be able to really do? And some cases strategics had a hard time buying the types of assets we did. Um, can you execute them and structure them in pretty unique and capital efficient ways? And then can you add value to them in the in the you know in the long run by really changing the trajectory of the businesses? And then you do well with that stuff and then the capital comes in. I mean the re the we got to 225 billion dollars of assets because we had good returns and people gave us more capital. We didn't start with saying we want this amount of capital, let's go now figure out what business we're we're gonna be in. And so I do think we've got to always come back to the basics because no matter how much you like slice and dice and chop up the product and redesign it, at the end of the day, if the returns are not consistently beating, you know, the public alternative or the relevant indice, then the ingenuity with which you've distributed is really not going to matter that much. Having said that, if you've got a good product, now there is a broader audience. There was there were some reasons why it didn't reach though that broader audience because some folks just didn't really have the wealth pool to be able to involve invest it in and it's in big chunks. There were there obviously accredited investor, you know, kind of rules. There was also just a reach and an act, general reach and access question. And so the fact that those are now being solved is not a bad thing, but you can't take the new thing and dispense with the old thing, which is generating good returns and hope it's going to be the same thing. Right. I think you still got to really focus on returns. And when is the point when the distribution and the capital aggregation actually runs in conflict with generating good returns, i.e., because there's so much capital, you feel like you have to deploy so much. And so you're diluting the those choice unique investment opportunities we talked about, or you're shifting your internal resources more towards the distribution and capital side as opposed to the value creation side, that's when you you you run a risk. And you know, we we talk about that all the time, by the way, internally, which is is what our pace of deployment of our funds? What's the diversification and portfolio construction that will allow us to generate those returns? Knowing that the world is pretty cyclical, we may love a business for all of its undermanaged characteristics or growth characteristics, but it could be caught by some you know macro you know headwind that that's a challenge. And so you want to have all those tools and you want to have them be free of you know other other issues associated with where you're trying to sell your product and how you're trying to sell your product so you can deliver those returns. And when those two things mix up, I think is when you, you know, you could see some issues. Right. Yeah. It kind of brings the cart before the horse, right? Because like you were saying, I think we mentioned the the difference between Bain and a lot of the other big managers of its kind of scale is that you guys are private. And I know when I spoke with John back in the day, like that was something that he was really focused in on, and the the kind of, I guess what he saw as the compounding advantages to that as everybody begins to refocus, just as you naturally will, because public markets love stability, they love being told, Oh, you're gonna have a management fee that's going to print again and again and again, like an annuity in perpetuity, like the the kind of oddball like one-offs from, Oh, I did this home run deal, well, great, but what have you got for me tomorrow, right? Right. Um and I mean, Bain, obviously, you're private. I know you guys have said that you you like that structure, you want to continue that in the future. I to bring it concretely down to the fun level though, so what does your exposure to retail world look like? And how does it compare to your overall complex of, I guess, you know, private credit and private equity funds? Because everybody is kind of growing across the map right now. Well, listen , retail, brawly defined, you know, private wealth. We do have meaningful exposure to it because it's been a core part of our investor base for many, many years. And so high net worth families, family offices, and the like um have been a very interesting, you know, 20% ish kind of chunk at least of of almost all of our funds. We also do have uh a you know a private BDC, a public BDC. We're uh in the private credit business really just focusing on middle market lending. But that has been a little bit more advanced or ahead of the curve along with real estate in terms of having these products. Now they don't all serve just retail. Some of that goes to institution. But so we do have experience in it. It's been, you know, more an outgrowth of the type of investor that's wanted to invest in big capital funds versus us saying we're going to set up some new product to actually go after that particular universe. They're they're all buying into just the general funds we have that institutions uh buy into as well. So it's an important part of the base. Secondly, as we talked about, it's growing a lot um because there's been a lot of wealth um creation and now easier access to these pools. And you know it's something we'll we'll look at. You know, we'll look at the notion of is there is there a way to reach that you know audience that makes sense with a bigger direct sales channel. We do work with other third-party private wealth managers as partners. And so that's another way to expand, uh expand the scope. And there could be a time for, you know, unique products to serve that that have some semi-liquid , semi-liquid uh feature. Although I would say some of our institutions might be interested in a in a semi-liquid feature too, because liquidity is, you know, yes or no . Um private, yes or no, you know, or excuse me, wealth or retail, yes or no. Those are two two different things. I think they're conflated right now because people have built semi-liquid funds that go after retail. But you could choose, you know, one of each of those four boxes to be in. And that's just really a matter of where we want to drive our fundraising to have enough capital to support our business, our growth. I want to nudge on that a little bit. I think it's interestingly you say that those are getting conflated, like the idea of which channel you're in and then how the product is um actually designed because you mentioned semi-liquid and for those who don't follow this as closely basically what we're referring to here are various structures where investors can pull out some set amount of money usually up to a set percentage of a fund's NAV . And if you go beyond that at the funds discretion, they can kind of gate those redemptions or or just like prorate them, which you know they kind of say up front. But now we're in a period where a lot of folks in in the world of private credit funds, BDCs, uh are prorating redemptions kind of across the board, and this is just like across the industry right now, driven by whatever. Like I I am interested 'cause I like do you think that we're at the right place in terms of the design of these products and in terms of the delivery of liquidity? Because then there's also like a further conflation rate, which I know a lot of folks like the Apollos, et cetera, of the world are also talking about regular daily pricing. So you have like all these layers stacked on top of each other, right? You have the pricing, you have the liquidity, you have the distribution, and it just it feels like we're moo going to be moving to something else that isn't where we are right now. Aaron Powell Yeah. I mean, I think the the main point is that it's it's early. So, you know, you can look at the private credit side and that um, you know, there's potentially some some you know cracks in some of the um you know funds and underwriting and and such that then has caused these new retail investors to look and say, oh well, I didn't expect that. And now they're looking at all the detailed terms and they're uh and they're kind of saying maybe this was not as much of a uh as much of a fit. That to me has a whole lot to do with it being early, the first cycle that's really experiences and the education process that went into the sales uh to go all those things are either fixable or will be corrected through the learning effect of time. So I don't look at it necessarily as a fatal flaw. Again, leave aside whether it's our strategy or someone else's strategy. I don't think it's going to go away. I think it'll it'll just be improved the next the next time around. And if there are some funds or GPs that were on the really egregious side of that, that might be trouble for them, but most of them are not. I think this is gonna be more of a refinement of of this product, you know, over time. But listen, you know, I I kind of look at this as something where you know product design, your investment strategy, product design, and base, ultimate base, they just need to be you know aligned pretty pretty well. And so um for us, again, you know, we we like investors who've got the long-term perspective and um who you know understand the the value creation process. Um but on the flip side they might want to invest in like smaller chunks than what would have typically been what was required to get into you know a bank capital fund. Or they may want to be able to just over time trim their positions here and there. I mean you you said it right semi semi-liquid, you know, five percent uh quarterly, do the math, tak ites a takes a l it fair amount of time to fully get out of your um, you know, position. So I think it's actually probably a good tool to be able to manage your allocations without having to go to the secondary market and sell your position at a a discount. So to me, if you said the problem is I want to be able to refine asset allocation , not hit the exit door when the cycle goes down, then I think it's good. But if you want to be able to pull the ripcord and go out, then it's then it's probably not good. And so that's that's where the well I mean if you want to be able to pull the ribcord out, then you know, you need a liquid pro you need a a public liquid product, I think. Right. Which fundamentally is never going to be like a perfect one. And it won't be the same returns. So you can see this is segmentation, product design against the thing, and then and then you figure out uh how you uh you know how you present that series, a continuum of options to your investor base and and try to maximize the overalls. And obviously folks are looking to pull the ripcord a little bit now because they perceive some stress out there, right? And I know a lot of the conversation has been around software. There was a lot of lending by private credit funds to software and there was concerns that that got overheated in in like the twenty twenty one cycle. But I'm curious on this point 'cause uh I think probably both of us were recently at the Milken Global Institute conference, which for those who don't follow is kind of like I guess Coachella for finance. Uh and despite the brave face put on school with yes . How could you say that, David? Uh but um, you know it, it was like was a brave face that was put on on the public panels, I think. But a lot of the conversations in the hallways were about uh, you know, like we have to get back to our knitting, let's refocus on what what we call direct lending was originally all about, which was we lend to mid-market firms who are left behind by the big banks when they kind of pulled out of this market. Uh, it's less about the flashy tech and software stuff. It's really, really about like getting back to basics. And I'm curious about this because I feel like that kind of describes how Bang Capital describes itself and what it's doing in private credit. And yet I look out at the PDC landscape and the names that are stressed. And it's not just software. I see like quick serve restaurants and healthcare rollups and whatnot. So like it it's not that simple a question, right? Of just a bunch of people saying like, oh, let's just redeploy into the middle market. Yeah. Well, thank you for mentioning our strategy, which I'll I'll go back to, but I was gonna defend the industry a little bit before you get you there. So listen, I think the private credit model is very valuable. It's here to stay. It's you know it's because the banks um you know were not able to provide what was needed in the market. And the private credit firms have flexibility. They have a asset and liability, you know, matching essentially with their funds to to match the investments that they're funding into. And they offer pretty, you know, attractive um uh terms and actually you know generally i think they've all been pretty good partners to the to the business to the businesses um i think what happened and i don't think it's really just software is that you saw just a big peak cycle and a lot of big deals. And um a lot of you know players went in there. And I think, you know, probably you could argue some of the you know underwriting approaches and standards were um were diluted a little bit kind of over time. We're big consumers of private credit, and we enjoyed some pretty favorable uh terms on the on the on the kind of large cap uh side. Um and you know, software versus not software. I mean, listen, I think yes, there was people loved and still like a lot software, but it was you know this asset light, recurring, you know, revenue kind of kind of business. But then somewhere along the way forgot that it's technology. It's not a utility. I mean the metrics kind of look like a utility, but it's it's it's it's technology, so you do have some um technology risk in there. Some of some of the software was just was just high prices, you know, and so when interest rates are low, these are the recurring businesses, people said, hey, it's okay for the floor to be 25 times EBTA and the ceiling to be seven times revenue or eight times revenue. So I look at that and say, hmm, I've seen that before it wasn't software the last time. It probably won't be software the next time that you have that happen. And so the industry's kind of kind of working through that now. I do think that where we're refocused in the middle market, and maybe you say others are now are now looking back at that again, i is quite different because um in the middle market, um, you know, there are it's just a different set of dynamics. You have more lender protections, you you can have a bigger portion of a deal, and so you can be more one-to-one with the uh with the sponsor. Uh it's it's a little bit more of a collectic mix of of industries as well, and so then portfolio diversification can can be good. But private credit, listen, the other day, this is a a solution for a problem that's out there. And um again I like today my is my big pitch is stick to the basics, you know, uh lend at at appropriate spreads or or or risk levels relative to the risk you're underwriting and avoid defaults. And uh you know, if if you do that it'll it'll be pretty good. I don't think anything's fundamentally changed uh with that equation. And so I think some we just have to get back to that equation. So right. And I think the thing that I'm trying to to bridge across to is because that world looks pretty different, right? If everybody were to just like refocus on look, we may'bere not stretching as far as we were on the large cap stuff, which then has an upstream question for what are we going to do with all this capital, which you know, itself faces another upstream question of are we going to continue to have such a glut of capital. And you mentioned you guys are big consumers of the product as much as anything. And I'm willing to bet like the last few years were pretty great for anybody who was consuming private credit as a sponsor. Um, but now if you have like a capital availability pull pullback, I presume that's going to change something for the private equity business. It's going to change cost of capital in that business. And it's maybe going to squeeze, you know, we've seen for years now people have been talking about, I think of like Apollo Global Management's Mark Rowan and other folks kind of saying like the easy days are over for private equity and etc. Like Payne is very much a private equity shop. Like do you feel those pressures mounting or is there some kind of offset to that? Aaron Powell Well, we're more their private equity shop and so uh you know, we have a very diversified very diversified business and um you know, private equity is a really important business, but we've got a lot of the other ones, so I'll just state that. But um um listen, the day when cheap favorable debt terms are not quite as available and the benefits of those stop getting passed on to sellers in the form of high prices is not a bad day. That's not a day I dread. And so I think the reality is, you know, when things get excessive on capital availability and the terms of those capital. Generally thats lead to heady, a heady pricing environment and a loss in some of the more you know nuanced aspects of underwriting and value creation that we think are really, really important. And things get, you know, especially stable assets get get priced to perfection. Um and and really it just leads to to price inflation, you know, for assets. So we don't look at that as a bad thing. Would deployment slow in that case it may may sl slowow it but a little bit slower deployment higher quality you know on the way in that i i'll take that trade and so um again i i i think it's, you know, one the of fundamentals of the equation that makes this a great asset class and business to to be involved in over across cycles is really the is really the creed. Maximizing what you can kind of like get and suck out of any current cycle when it's great, it's usually not the, you know, the recipe. And so there are no deals, I will say no deals, where we do that deal because of the attractiveness solely of the capital structure. Right. Which is not that makes sense. Which is not the way we think about things. And I mean, if you're talking about oh you need, you know, that kind of diversified origination pipeline, right? Even if if times do get tight on the capital side, you know, when I think of Bain, I think primarily, and this is obviously your background of the global scope, because you guys were really early in Asia, really, really kind of like heavy in that market. And I wanna pull back and think about that global focus because look, I'm gonna be honest, part of the reason this is on my mind is it's sort of a residual of the AI hype trade. I think though it's just like various platforms now allow more US retail investor access to Asian public equity. So now you're seeing like Korea and Taiwan go absolutely crazy. Um but private equity was there for a while, right? And you guys were early there and there were a lot of tailwinds on that from like Japanese corporate governance reform to shift some of like savers behavior and whatnot. I was wondering if you could talk a bit about that, because it seems super constructive, even if I do get worried about the AI trade spillover. Well, I'm glad again our minds are melding here because I was gonna pivot the last topic to say that some of that it's a great discussion, but it it there's a US centricity to it. Um, because the dynamics are very, very different as you go outside the United States. The other thing which is different, which maybe we'll talk about it, it is different across asset classes than we're in some other asset classes where some of these things we were discussing are not relevant. There's other opportunities and issues. So starting with the global, um, you know, for us this has been um a really, really, really important strateg ic for us. It's it started actually because we said to be good stewards of US-based businesses, we have to have a global mindset to be able to support those businesses. That's what brought us to Europe and to Asia. But then we understood that those were really attractive markets in their own right and built very, very deep local teams. And the nice thing was then once we and by the way I'm skipping like 15 years of business building and investments that we had to make. But then then you can go then add new layers, right? So now we can talk about global transformations, multi-geography deals, some of which may be originally Japanese headquartered, but they're global or European headquarters. So this is a kind of nice way to continue to build layers of differentiation in an ever competitive, uh, ever competitive world. But you know, we're seeing these markets be on a much earlier part of the growth curve, just in terms of the penetration of private equity, private real estate, and all the different asset classes. Um, much more uh inefficiency, let's just call it. And so um, you know, uh people always expect div you know, more emerging markets t to be inefficient. But we find outside the United States there are developed markets that are inefficient, like Japan, like in some ways Germany and some sectors of Germany, um, Korea. And that we love that because then you've got the mod ern structure of transactions, MA, capital structures, exits that we like, but undermanaged companies . And there are a lot of levers to be able to pull. And is that mostly a corporate governance question? Like there just weren't the same pressures on how corporate governance evolved in those countries as they were in the US. Yeah, l at least two big things. So Japanese, you know, companies in particular um you know just didn't have that outside in pressure to be focused on return of capital and and focusing on their core business. They had big extended portfolios and there was a lot of capital availability. And there was a cultural overlay which said selling your b you know divesting a business is not kind of looked upon well. But the other thing, which is a little bit separate from corporate governments, is the founder market. I mean, there were a massive amount of businesses in Japan that were founded post-World War II, and you know, figure out what age those owners are, but they're you know at the point where they need to turn over their businesses. And for separate reasons, there's not been a great playbook for building sustainability in one's management team um and you know even succession of of ownership and that's been a big a big big driver um some of those companies had pretty good kind of governance because they had strong founders but, they didn't have a success, you know, exact successor. And so private equity has been a solution for both those two things. And those are big, big parts of the economy. And we see that parallels in Korea. We're now starting to see that in India. India used to always be a market about just growth capital, supporting an owner of a business to help them, but you know, please just take a minority because we want to run this thing. And now you have some who are saying, okay, I'm I'm gonna turn it over to the next generation. I'm okay monetizing my wealth. There's different places they can now invest that. And they'll sell outright control positions to us. So we're seeing a big thrust of of you know founder owned businesses up for sale in in India as well. So all these markets, you know, much, you know, much earlier um on the curve. Yeah. And I I'm kind of wondering like is a a specific transaction that you would point to as being kind of paradigmatic of what you guys are doing that because when I think of uh especially like pain in Japan, like I think of like these really super interesting like special situations, like you guys were obviously involved in Kyoxia and Seven and I and all this kind of stuff. Like I'm I'm really curious if there's like any individual transaction that you appoint to as being like, look, this is kind of a a real marker of what we can do in this market. Yeah. I mean, there there are a lot of really interesting ones. I mean, one that just pops into mind because you're talking about corporate governance is um a business called Evident, which makes um pretty leading edge um you know lab microscopes and uh industrial uh microscopy. Um and so it's a very technologically intensive intensive business. It used to be owned by Olympus. And Olympus, even though people know them for the cameras, most of Olympus business is endoscopy. And endoscopy they have like 70% market share and it makes like 30% margins. And then they have the business we bought, which is you know good 30% market share and makes you know 17 or 18% margins. And so the second one is still really good , not quite as good as the first one. Japanese managing team 10 years ago would have never ever divested that second business. In fact, as long as the business was break-even, generally, it was like you're gonna keep it. Um, and so this was to me a signal of ult final reaching the final chapter of corporate governance, which is there are external pressures. You got to focus both competitively and from a capital perspective on the core business. And so we're going to divest a business that's an incredibly attractive business that'd been part of the, in fact, I think this was the original business. I think they started in, you know, the lab stuff and then well they started cameras, but then labs and then into healthcare di uh equipment. And so we never would have seen that in Japan fifteen years ago. Like if I went to talk to Olympus about please think about divesting and selling this business to me, we would have been laughed out of the room. And this was, you know, sold as a business and it's a big global business. In fact, it has dual headquartered in in uh the US and Japan, but undermanaged. And you know, we carved it out and we stood up as its own business. It's currently private. But um to me, I feel like that's it's if if things like that are happening, then kind of the world's are everyone's oyster here in I think in in Japan. Right. And that kind of leads into how I wanted to wrap this up, which is I'm curious if we think about okay, we're going through a period of cyclical stress that is really kind of it feels very focused on US, maybe slightly in Europe, but um we have a lot of questions kind of swirling about like where do people just want to allocate right now where will they have the capital to do so. I'm I'm interested like if you think about five years out from now, Bain specifically and the industry generally, like is the expectation that yes, this is going to be, you know, top managers continuing to consolidate their positions. This grows into an increasingly global franchise for everyone, or is it going to be a bit more kind of piecemeal and audible than that? I mean, first of all, I think it's really important and there's still a lot of growth to go. I mean more rough you know, more than fifty percent of our our our business in the case of private equity is already outside the United States. And I look at the growth curves and the opportunities we talked about, and I think that number will um will continue to increase. Um is it top of mind for folks? Yes. Is everyone gonna be able to pursue that? No. It's it's really hard. Um anyone who's managed global businesses, particularly in this challenging macroeconomic environment, will know that you need both local deep resources, you know, to be part of the local fabric, but also have people on the ground to help support those businesses. But you've got to have the global framework. And then managing globally extended businesses is tough with all the supply chain challenges and and disruptions. And so it's not for the faint of heart. And I don't think everyone will do it. I think that's some of the reason we've staked it out because we're looking for those things that are harder to do, and hopefully they can generate those excess returns over time, but you need a big, big commitment to it. Um , we we look at that lens, by the way, which is geographic diversification. Um, but we also look at big themes. And those themes tend to run across geographies. And so, you know, new technology infrastructure, aerospace and defense, uh, the wealth boom that that we're experiencing, new models for labor to counteract inflation and just chronic labor shortages. Healthcare, big global trend. Undersupplied healthcare everywhere, too high costs, aging societies pretty much everywhere you look. So these are globally pervasive themes. And so we look at things by country, but we also look at them by global theme. And you know, it's great to have the global platform because you might get traction on one of those themes due to the serendipity of deals in one area, but then you learn the playbook and you can take it to take it to another. And so that's like the final echelon or level of global, you know, globalization is you can you can really pursue global, you know, macro thematic themes and then do them across across geographies. Fascinating. Well, David, thank you so much for taking the time to join us on the Big View and look forward to following what Ben gets up to over the coming months and years. Thank you. It's always great to chat. There's a great, a great podcast. Appreciate it . That's all we have time for this week. Thanks to David and to Jonathan for that terrific conversation. And as always, thanks to you for tuning in. This podcast was produced by Oliver Tasich and Pranav Kiran with the help of Mike Copeland and John Hodge here in the studio in London. 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