A form of preservation and defense that gives you strength and the ability to play offense. Notable transactions include advising Charter on its $78.7bn acquisition of Time Warner Cable, Take Two on its $12.7bn acquisition of Zynga, eBay on its $9.2bn sale of eBay Classifieds to Adevinta, MGM on its $8.5bn sale to Amazon, Apollo Funds on its $5.0bn acquisition of Verizon Media, Starz Networks on its $4.6bn sale to Lionsgate, and Snap on its $3.4bn IPO. At the same time, the U.S. is reasserting its global leadership, benefitting from its role as the home of free markets and abundant capital to drive innovation (even during time of scarcity), a still strong dollar and global reserve currency (despite clear challenges), and energy and food independence compared to other regions. One legendary media executive once said to me: When I was finding my way, we didnt even use the term entrepreneur. Approximately 60% of companies that have listed since 2019 were unprofitable at listing, and today, theyre trading down an average of 48% from their IPO price. The resurgence of live experiences, generally (above pre-pandemic levels in many cases), and all the sensory inputs they entailfrom experimental flavors to pulsating soundwaves is a pleasing reminder that real life will never be fully replaced. This year, we highlighted the music sector to our partners, which led to the formation of MUSIC, a joint venture to invest in the evolution of the music industry, backed by $200 million in longterm capital. Rebundling the Landscape: Whats Your Edge? The yield curve also remains inverteda leading indicator of recession over the last 50 years. To his credit, Elon Musk has recognized that strong new leadership will be essential as the company rebuilds stability and trust (and following a challenging period of growing down). Alma mater. Swarthmore, PA 19081. j***@liontree.com. For the content companies, this means a focus on creativity to produce absorbing content across formats and audiences, profitably, and working with the industry to find the best home for that content. These pressures show no sign of abating, and conflict looms. We seek to both advise and invest in our relationships and will be doing so amid dislocations and crosscurrents where independent, differentiated capital and long-term shareholder support will come at a premium. Gaming Weekly Relationships of this kind, characterized by discerning advice and long-term, value-added capital, will be crucial in an environment characterized by difficult decisions and the necessity to make do with less. 4.0 GPA IB. While the fragmented landscape creates more ad space to fill, two questions are top of mind: 1) Will there be enough to go around? The reality, however, has been the reverse: social media has left us more disconnected. And while East and West are retrenching into revised economic spheres of influence, the Middle East and the Gulf, led by Saudi economic initiative, are creating an independent power base and new hub of innovation as they embrace key transformations of the futureincluding urban living, healthcare, digitization, food technology, and (despite oil being the primary source of revenue) energy innovation. Growing down, I call it. Given these realities, we will be in wait-and-see mode, with considerable risk that rate hikes extend beyond current expectations, making 2023 a challenging year for incremental investment and growth initiatives. Regarding other uses of capital, companies with strong balance sheets are leaning into organic investment opportunities to hone competitive advantages and position for future growth, particularly in areas like networks and infrastructure (cloud and data centers, fiber builds and deployment). LionTree is an independent investment and merchant bank focused on media, technology, telecommunications and consumer-related industries with ~$750bn in total transaction value. LionTree is not providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice or recommendation in or by virtue of this letter. High proficiency in Microsoft Office suite. Sometimes you have to grow down to grow uplike the roots of a tree, an image I left you with last year as we were exiting a less grounded market cycle. Looking ahead, I expect continued strong activity in the software and video game spaces,to name two. Indeed, expertise, as well as creativity, may be in the process of being usurped by generative AI, which puts the power of creation in the hands of anyone with a basic keyboardfrom ChatGPT (text to dialogue) to DALL-E (text to imagery), to Midjourney (text to animation), and many others not mentioned here. In the U.S., the sale of Simon & Schuster was blocked following a lengthy review, and we will await the resolution of the FTCs suit to block Microsofts proposed acquisition of Activision Blizzard. It will test our strategy, resources, and relationships. Strong leaders are made both in and for difficult times. Growing Down. The lowest points in the treasury yield curve are the 10-year and 30-year, leaving high-yield companies that cant access debt beyond seven or eight years relatively disadvantaged in the current market environment, due to both spreads and absolute rates. Given lower valuations, many private companies will have to navigate structural considerations as they consider capital raises or mergers, increasing the prevalence of preferred waterfall issues in private sales and/or mergers. But they will not be alone. Learn more about our facultys research, student activities, alumni game-changers, and how Berkeley IEOR is designing a more efficient world. As the regions rulers understand, old paradigms dont last forevereven the hydrocarbon one on which their wealth has relied. Gone are the days, I hope, when we let visionary leaders with no integrity operate companies and skip board oversight. When the balance of the world shifts, perspectives change. Founder and CEO of LionTree LLC. In that model, Reference Shareholders provide what I call partnership capitalconcentrated, centralized, sustained through uncertainty, backed by committed advice, and allocated to maximize not short-term gain but long-term, transformational value. To take the other football, its like returning a kick-off. But a compass is not enough. And while there are still hardware hurdles to overcome in virtual reality, and the technology is still in its early days, I view both augmented and virtual reality as a means of expanding the reach of live experiences in the digital realm. Thanks for your interest in the 2022 Corporate Strategy Summer Analyst position. He is the founder and chief executive officer of LionTree LLC, a global investment and merchant banking firm focused on media . We are always evolving to meet the demands of a changing landscape, helping our partners seize opportunity at the intersection of technology, media, and culture, while also preparing for the future, building across products, thematics, and geographies. So, cash must be put to work and inflation can be a double-edged sword. But its not just about getting smaller. New Denver Broncos head coach Sean Payton said at the NFL Scouting Combine that he tried to lure former Broncos head coach Vic Fangio back to Denver before hiring another former Broncos head coach . Just as we are looking forward to finally escaping the pandemic and reaching for normalization, we are hit with the threat of a downturn that can cause us to recoil. Inflation, and the responses to it by governments, banks, and investors, have dominated the headlines. The root word in Hebrew for counsel also means tree. We seek to match long-term-oriented CEOs with long-term shareholders, enabling companies to play to their competitive advantageand we align ourselves with the outcome through our own capital. Boards approved strategies they never would have previously and will be even less likely to approve in the coming year. Its the first year since 1969 that treasuries and equities are both down meaningfully, raising the cost of both debt and equityas well as the threshold for organic and inorganic growth alike. Incoming 2023 Investment Banking Summer Analyst at LionTree LLC When rates rise and the return thresholds elevate, we are forced to choose; innovation and inorganic activity come at a higher cost. While scarcity plays a starring role in many important problems, abundance sets the stage for it. Once on stage, scarcity captures our attention and forces the self-correction that eventually makes future growth possiblefor leaders, companies, and countries. But as the company wrote in its most recent letter to shareholders, building a large, successful streaming business is hard. The company estimated its competitors are all losing money, with combined 2022 operating losses well over $10 billion, vs. Netflixs $5 to $6 billion annual operating profit. Competitors need to find their path. 1/16/2023 11:26 PM. Ritz and Escoffier: The Hotelier, The Chef, and the Rise of the Leisure Class by Luke Barr, When Women Lead: What They Achieve, Why They Succeed, and How We Can Learn from Them by Julia Boorstin, From Strength to Strength: Finding Success, Happiness, and Deep Purpose in the Second Half of Life by Arthur C. Brooks, Metahuman: Unleashing Your Infinite Potential by Deepak Chopra, Power Failure: The Rise and Fall of an American Icon by William D. Cohan, Build: An Unorthodox Guide to Making Things Worth Making by Tony Faddell, A Bankers Journey: How Edmond J. Safra Built a Global Financial Empire by Daniel Gross, Play Nice But Win: A CEOs Journey from Founder to Leader by James Kaplan and Michael S. Dell, The General Theory of Employment, Interest and Money by John Maynard Keynes, Leadership: Six Studies in World Strategy Hardcover by Henry Kissinger, When We Cease to Understand the World byBenjamin Labatut, Reminiscences of a Stock Operator by Edwin Lefvre, Thomas Jefferson: The Art of Power by Jon Meacham, Scarcity by Senhil Mullainthan & Eldar Shafir, The Revolutionary: Samuel Adams by Stacy Schiff, Vogue X Music byEditors of American Vogue,andJonathan Van Meter, Alexander and the Terrible, Horrible, No Good, Very Bad Day by Judith Viorst, Stockholm: City of Islands and Water by Jeppe Wikstrm & Per Kallstenius, Translated by Ruth Urbom, The End of the World Is Just the Beginning: Mapping the Collapse of Globalization by Peter Zeihan. U.S. TMT has shown particular resilience, including parties seeking to consolidate (Adobes $20bn acquisition of Figma, Broadcoms $70bn acquisition of VMware, Microsofts attempted acquisition of Activision Blizzard for $68bn), to use M&A for market expansion (Amazons $1.6bn acquisition of iRobot and $3.8bn acquisition of OneMedical; Oracles$28bn acquisition of Cerner, Googles $4.7bn acquisition of Mandiant), or to expand into new geographies (e.g., Naver, the Google of South Korea, with its announced acquisition of Poshmark). Meanwhile, Netflix is experimenting with ways to embrace theatrical to help bolster topline revenues, while also driving subscribers and protecting its core product. 2023. I believe that what I wrote in the middle of the pandemic is still relevant: If we focus on the essential, we make ourselves essential. It was true then and it is especially true now. These burdens, as we have seen recently, impose heavy obstacles to profitability. We must recall one of the most celebrated early promises of the internet, that it can function as a democratic public square. In the coming period, creativity and innovation will emerge from the CEOs who have demonstrated their ability to play to their competitive advantagetheir edge. As we consider the leadership qualities that are essential, trust, along with its corollary, credibility, will be a crucial assetacross both the private and public sectors, leaders of both companies and countries. The verbal link has made me think deeply about what weve built at LionTreewhere we are today, where well be tomorrow, and our tentpoles throughout. What are the investable opportunities now that unprofitable growth initiatives make less sense? What this illustrates is that its very hard to be both content creator and distributor. 11/16/2022 5:48 PM. As has been revealed by the markets, its not enough to bet big on the future. The LionTree platform, spanning strategic and financial advisory, capital markets, and merchant banking, is meant to serve CEOs and entrepreneurs through any cycle. The first half of the year could also look very different from the second half, as valuations normalize, and rates potentially settle from their peak. Kindred Media now averages more than 1 million impressions per month. Upon completion of the Program, Summer Analysts have the opportunity to receive full-time Analyst offers for a post-graduation starting date. But it is exactly in such periods that strength is forged. And before the rapid increase of interest rates, we saw some of the largest take private activity in technology such as Vistas $17bn acquisition of Citrix and of course the Twitter take private. In the case of large media entities with higher levels of debt, divesting of non-core assets could provide the financial flexibility required to achieve or enhance profitability in their core business, and play to their strengthsfor example, Hasbros divestiture of parts of its eOne entertainment division. What the streaming landscape lacks is sticky engagement, a connection that can be formed by being the best in a category, or by offering a multi-product or multi-content experience that keeps customers happy over time with high breakage costs or exceptional value. These dynamics bring with them new responsibilities. I see several trends contributing deal activity: 1) M&A to simplify conglomerates, including potential asset divestitures for both public and private companies as they use capital to de-lever or refocus on their edge; 2) stock-for-stock mergers for both private and public companies, where relative valuation declines are less of an issue and where financial synergies are expected to be the highest; and 3) I do foresee return of the leveraged buyout market in the second half of the year, as there is still abundant cash in private equity coffers, as financing banks clean up their balance sheets and as price stability or at least visibility returns. In the mold of a classic merchant bank, LionTree is here to fill the gaps through our advice, recasting problems as solutions, and through our investments, unlocking value along the way. Our model gets smarter over time as more people share salaries on Glassdoor. The U.S. remains home to many of the strongest, most transparent, most technologically advanced, and most influential companies and entrepreneurs. As an Analyst, you will have the opportunity to work on projects leveraging your expertise to help our clients more confidently make decisions . 2023 will likely not be easy. LionTree offers a 10-week summer analyst program for rising seniors. If you are interested in applying, please submit your resume through the below Handshake submission. Over the last several years, traditional media players have struggled to keep up with content expenditure compared to their tech peers, even when it was more affordable to do so. The traditional model was built on multiple revenue streamsadvertising, subscription, long-tail syndication, and content bundling, where owning IPand the library of content built up over timewas the bedrock of long-term value. This will take creativity, trust, and community. Im proud of the way weve established the firm as a community of forward-thinking advisors, CEOs, investors, creatives, and others, across industries and continents, intently focused on helping each other, and on having an impact (and some fun along the way). Digital Real Estate Monthly As an example, in Q3 a broad subset of technology, media, and telecom (TMT) companies beat EBITDA expectations by ~20% while exceeding revenue expectations by ~2%, clearly doing more with less (Sources: Bloomberg, FactSet). This puts a premium on creative dealmaking and M&A, structuring, and access to long-term shareholdersand this is what we at LionTree excel at. As the Great Decoupling plays out, it is not hard to imagine a future in which some places are open only to Chinese investment (Central Asia, parts of Africa, Russia), and others mostly to U.S. investment (the West). 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