Going back to the point you made on rolling the equity and structuring these deals, why don’t you use debt instead of partly cash? Isn’t it more efficient?

Risk. Why did we raise 130 million in July? We didn’t need the money immediately, but I just felt that it was too risky to take on debt. There was another reason as well; we wanted a bit more flexibility. In merger negotiations, it’s good to have the money in the bank, so that you don’t have to go to shareholders, and you can do deals quickly and effectively. If you look at our competition, the holding companies are not in the market at all. They’re talking, like WPP and others, about getting into the market, but we’ll see what they actually end up doing. In terms of selling companies, you don’t want people who want to sell companies and do earn outs. You want people who are going to commit to the mission.

There is a missionary zeal here. We want to build that new model and we want to aggressively take down the existing models.

To tap into the emotional side of people you hire?

There’s a passion for this that is extremely important.

It’s important to have a villain?

It’s important to have a target, that’s for sure.

My question is also around how much leverage these businesses could take because they are so cash generative with low operating leverage.

I would say, in comfort, they could take two times leverage. In our area, there are a lot of private equity companies, in fact, on deals. On the client side, it’s Accenture; that’s the competition for us. They were the competition on BMW; they were the competition on Mondelez. We are two-zero, Victor Knaap likes to say. We are about four or five to zero up, according to him, but on the big stuff, it’s been two-zero. They compete with us on the client side, then compete with us on the deal side and then PE, private equity, on the deal side, because they have more money than Croesus. They’ve got about a trillion dollars of unleveraged equity and they could leverage that three, four or five times. You are talking about huge resources and they are very aggressive.

I was speaking to one of them yesterday and he’d just raised a new fund. He said that they’d done extremely well this year, given Covid; they’ve raised new money but it’s not proving easy to deploy the money and the pricing has gone up; so private equity and Accenture on the deal side.

For debt, I think you can probably go to two times. I think private equity goes more than that, but I wouldn’t feel comfortable. We’ve said to the market that we would leverage up S4 by one and half to two. We probably have a couple of hundred million pounds of debt capacity, it we wanted to push it. My closest financial advisor said to me, when we were contemplating the equity issue, go for it. So we went for £75 million and we upsized to just under £115 million.

On the pricing, due to this private equity and competition coming in, do you expect these assets to really increase in price because of the cheap money and competition?

Yes, I think it is. We’re seeing a lot of activity in the US, before the year end, because they were worried about capital gains tax increases, under the Biden regime. I actually don’t think that 2021 will see that, but we’ll see. But there was a rush to complete stuff, to avoid the risk, before the year end. We are seeing a bit of frenetic activity but, with zero interest rates, people want to deploy capital.

Somebody said to me yesterday, about SPACs, it’s a good place if you’re not getting any interest on money. You park it in a SPAC and, effectively, you have a warrant on the upside.

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