All right, twenty twenty five, marking a big year for deal making, with a second half surge catapulting global M and A to a near record volume of three point six trillion dollars. In our next guest says an increasing number of exits are expected through twenty twenty six, starting with IPOs, but quickly expanding to a more vibrant M and A market. Let's get to it with Bob Curly. He's Deputy Chief Banking Officer of Regional Banking at Western Alliance.
Joining us right now. Hey, Bob, good to have you here twenty twenty five. How did that end up for you and your team?
Thank you, Happy new year to you and Tim. The year was fantastic. When I talked to you guys in June, I was optimistic that we would see a good second half, and my expectations were exceeded. In fact, both for the bank overall and for innovation banking in particular. We've had a very strong finish to the year, and it looks like a good build to the book for next year.
Well, tell us little bit more about that, give us some color, or give us some insight into exactly what you're seeing. What kind of deals are we talking about, Well.
We're talking across the whole scale, which is a little bit different. What we had not seen before was earlier stage companies in the innovation sector going out and successfully raising money. The spigot has now turned back on. We started to see that late Q three and in the Q four we had any number of companies tap the market, and even more our teed up to tap the market
as we go into the new year. Part of it was the reopening of the IPO market, and by attention, as was just discussed on your show, the M and A market has really come back as well. So there's additional sources of liquidity in the market that we had not seen. That gets people who are funders of these businesses more optimistic as to what the future will be, what the exits will look like, and hence willing to make bets today.
A lot of ways to fund these businesses. There's equity investment, there's venture debt, which I know you certainly specialize in which one will take a front seat in twenty two.
Well, it's always led by the equity side, and that's both private and public equity. When we're talking about IPOs, that's public equity. But what the function of venture debt is to be able to extend early stage companies runt cash runways so that they can accomplish milestones or traction with clients to prove out that their solution does indeed work. And you can imagine what the valuation leap is when they are able to do that so well.
They don't have to give up any equity To.
Do that, they give up far less equity wall.
Far less do they not give up any equity if it's venture debt.
They do give a little bit depending on the situation. In the early stages, they'll provide warrant coverage on the transaction. It gives a little bit of upside to the to the lender, but compared to equity, much less delutive.
But are you ever doing deals in venture debt where you're just loaning money and you're not actually getting an equity stake.
That tends to be for later stage companies, growth type companies, so antinuum, it starts with the very earliest stage. You do see equity attachments to almost all the deals, and as the company progresses through its development chain, there'd be less equity, more to debt focus.
Hey, Bob. What kind of companies though? Is it all AI related? Is it bioscience, biotechnology? Give me an idea of the kind of deals that are coming across your desk.
I would say AI is a backbone or AI is now being attached to everything that comes across at anyone's desk, and so you have to dig in and understand what the level of AI is. In many cases it's machine learning or displaying automation. So everyone's putting the AI tag on everything, But that is the constant backbone or the consistent backbone that we see. It's now being applied to a whole lot of businesses. For example, in our medical and life sciences groups, we're seeing the use of AI
much more, much accelerating in that area. Also seeing energy what had been clean tech is now becoming energy tech.
What does that mean?
So it's energy change?
What does that mean?
No? I think it's a focus from just focusing on clean energy, for example, to how do we get more sources of energy at a more compelling price. And so it's really a transition in terms of AI on the what it's doing is transitioning the software what had been the software business into an AI business. But it's really going after the applications business. So how do we solve a specific company's problem today, what's the ROI on that? And that's where we're seeing applied AI really make some gains.
Bob, I want to go back to something you said though about deals coming across the desk, and you said everybody's attaching AI and you've really got to kind of go through stuff. That makes me a little nervous because that reminds me of the dot com where everything but through dot Com on, you know, and said they had an Internet strategy and every but he didn't. So is there a lot of that coming through or no.
I would say everything has a consistent backbone or consistent theme of AI, and what you have to look at is what is the comparative differential that they provide and how long lasting is that that differential going to last? And as a result, what we're doing is focusing on those sectors where there's a more immediate ROI for the ultimate enterprise client.
Bob Curley, Deputy Chief Banking Officer of Regional Banking at Western Alliance, joining us on this first trading day of the year,