Starboard Reveals Shake Shack Stake | Bloomberg Deals 8/5/2026

LIVE FROM BLOOMBERG’S WORLD HEADQUARTERS IN NEW YORK CITY. WE ARE TRACKING THE KEY PLAYERS, THE MAJOR MOVES, AND THE CAPITAL FLOWS SHAPING MARKETS, THIS IS "BLOOMBERG DEALS." >> WELCOME TO ANOTHER EPISODE OF "BLOOMBERG DEALS," THE ONLY SHOW DEDICATED TO CORPORATE ACTION SHAPING MARKETS. POLYMARKET SEEKS ANOTHER RAISE. IT COULD BE THE LARGEST PHARMA DEAL EVER, BUT INVESTORS ARE THROWING COLD WATER ON IT. ASTRAZENECA. WE WILL SPEAK WITH THE CEO OF STAR BOARD WHO HAS SEVERAL ACTIVIST CAMPAIGNS UNDERWAY. LET'S GET TO SOME OF THE BIG DEALS WE ARE WATCHING. IT FEELS LIKE THE DEAL WE ARE ALWAYS WATCHING. AN UPDATE ON OF THE LAWSUIT OF PARAMOUNT SKYDANCE'S ACQUISITION OF WARNER BROTHERS TRIAL SET FOR MARCH 2027. CEO DAVID ELLISON SPOKE ABOUT IT ON THE EARNINGS CALL TUESDAY. >> WE ARE PREPARING FOR A SUCCESSFUL CULMINATION ONCE IT IS DONE. WE RECEIVED APPROVALS FROM 65 REGULATORS REPRESENTING 65 COUNTRIES AROUND THE WORLD INCLUDING THE UNITED STATES FEDERAL GOVERNMENT, CANADA, EUROPEAN UNION, CHINA, AND MANY MORE. DANI: JOINING US IS BLOOMBERG'S SENIOR DEALS REPORTER MICHELLE DAVIS. I THOUGHT WE WERE DONE TALKING ABOUT THIS A DEAL AND IT KEEPS COMING BACK. A JUDGE HAS SET A DATE FOR THE TRIAL. >> A JUDGE HAS SET A DATE FOR THE TRIAL IN EARLY MARCH OF NEXT YEAR. IT'S NOT GREAT FOR PARAMOUNT, THEY HAD BEEN PUSHING FOR A MUCH EARLIER TRIAL DATE, HOPING TO GET SOMETHING BY NOVEMBER. THE STATES PUSHED FOR APRIL, SO THIS IS A LITTLE EARLIER THAN WHAT THE STATES PUSHED FOR, BUT THE JUDGE WAS SYMPATHETIC TO THE CASE, BUT PARAMOUNT AND WARNER BROS. WILL BE IN LIMBO UNTIL THIS GETS LITIGATED, UNLESS THEY CAN COME TO SOME SORT OF SETTLEMENT OUT-OF-COURT. WE UNDERSTAND THE PARAMOUNT CEO DAVID ELLISON IS OPEN TO SOME SORT OF SETTLEMENT, BUT IT IS UNCLEAR WHETHER THE STATES ARE OPEN TO THAT. WORST CASE, PARAMOUNT WILL HAVE TO PAY BILLIONS OF DOLLARS IN TICKING FEES WHILE THIS DRAGS OUT. DANI: YOU ARE ALSO ARE SPECIALIST AND PHARMA DEALS AND WHAT A WEEK THIS IS WITH THE DEAL FLOATED BETWEEN ASTRAZENECA AND BRISTOL-MYERS. SOME CONFLICTING REPORTS. WHAT ARE YOU HEARING FROM YOUR SOURCES ABOUT HOW SERIOUS THESE CONVERSATIONS MIGHT HAVE BEEN? MICHELLE: IT'S A TRICKY ONE BECAUSE THERE HAVE BEEN CONFLICTING REPORTS INCLUDING THIS MORNING WITH REUTERS REPORTING THERE ARE NO CURRENT ACTIVE TALKS BETWEEN THEM. WE REPORTED SUNDAY THAT THERE HAD BEEN SOME TALKS. HOWEVER PRELIMINARY. BOTH COMPANIES REFUSING TO COMMENT ON THE STATUS OF ANYTHING. WHAT'S INTERESTING IS AFTER THE NEWS LEAKED SUNDAY, THE INVESTOR REACTION MONDAY WASN'T GREAT. INVESTORS FROM BOTH SIDES KIND OF THREW UP ALL OVER THE DEAL. NORMALLY WHEN YOU SEE A COMPANY SUBJECT TO POTENTIAL TAKEOVER THEIR SHEARS -- SHARES WILL MOVE A LOT MORE. ANALYSTS QUESTIONED THE LOGIC OF THIS. ASTRAZENECA HAS A LOT OF GROWTH AHEAD OF THEM WHILE BRISTOL-MYERS HAS BEEN THOUGHT OF THE SICK MAN OF THE INDUSTRY. WE DO KNOW THAT AZ HAS WANTED TO DO SOMETHING REALLY BIG AND THE FACT THAT THESE TALKS WERE HAPPENING SPEAKS TO THE MOOD IN THE MARKET WHERE ANYTHING FEELS POSSIBLE. WE HAVEN'T SEEN A MEGA PHARMA DEAL LIKE THIS FOR A DECADE SO THERE COULD BE MORE TO COME SIMILAR TO THIS. IT'S A GREAT POINT. WE ARE FLOATING BIG AIRLINE DEALS AND BIG PHARMA DEALS. THAT IS OUR SENIOR DEALS REPORTER MICHELLE DAVIS. HOW ABOUT VITAMINS? PMG WINNING A DEAL FOR SUPPLEMENT MAKER THORNE AND SCARLET FU HAS THE DETAILS. >> PNG IS ADDING THORNE TO ITS COMPANY. THIS 3.8 BILLION DOLLARS TRANSACTION GIVES THE PE FIRM AND OUTSIZED RETURN ON ITS INVESTMENT IN THREE YEARS. THIS A DEAL IS EXPECTED TO CLOSE. P&G RIVALS INCLUDING UNILEVER WERE REPORTEDLY INTERESTED IN ACQUIRING THORNE FOR THEMSELVES. BECAUSE OF SLOWING GROWTH. THEY BOUGHT WHILE KIMBERLY-CLARK IS PUSHING THROUGH A $40 BILLION DEAL. DANI: THANK YOU VERY MUCH FOR THAT. POLYMARKET IS AN EARLY TALKS WITH PROSPECTIVE INVESTORS TO RAISE $1 BILLION. PEOPLE FAMILIAR WITH THE MATTER SAY IT WOULD RAISE POLYMARKET'S VALUATION TO $20 BILLION. TODD GILLESPIE REPORTS ON BANKING AND HAS BEEN COVERING THAT STORY. THEY JUST DID A FUNDRAISER IN APRIL. WHY DIP BACK INTO THE MARKETS? TODD: POLYMARKET, KALSHI, THE TWO BIGGEST PREDICTION MARKETS HAVE BEEN RAISING NONSTOP SINCE THE INCEPTION. THE FEVER AROUND INSCRIPTION -- PREDICTION MARKETS. THE WORLD CUP BLISTERED ACTIVITY IN RECENT MONTHS. BUT -- INVESTORS ARE VERY INTERESTED, PARTICULARLY THE HEDGE FUND SIDE, THE EXCHANGES LOOKING TO GET IN EARLY. ONE OF THE THINGS WE REPORTED WHICH HADN'T BEEN PREVIOUSLY IS THE APRIL RAYS CLOSED WITH NEW INVESTMENT FROM DE SURE, A PRETTY BIG NAME IN THE HEDGE FUND RACE. ONE OF THE EARLIEST QUANTITATIVE INVESTMENT FUNDS OUT THERE TRADING IN THE LATE 1990'S. KALSHI RATES -- RAISED A $22 BILLION VALUATION IN MAY AND NOW POLYMARKET WHICH WAS THE EARLY LEADER IN THE RACE AGAINST KALSHI HAVE FALLEN BEHIND. WE HAVE REPORTED EXTENSIVELY ON SOME TURMOIL OPERATIONALLY AND LEGALLY FOR POLYMARKET IN PARTICULAR THEY ARE TRYING TO REALLY REGAIN THEIR FOOTING RIGHT NOW. DANI: I GUESS THAT DOES NOT DETER INVESTORS FROM JUMP AGAIN, SOME OF THE REGULATORY CONCERNS ABOUT POLYMARKET? TODD: IT WOULD CERTAINLY BE A WORRY. THE CFTC HAVE LAUNCHED A BROADER INVESTIGATION INTO POLYMARKET AND SOME OF THEIR MARKETING MATERIALS. INFLUENCERS WHO WERE WINNING POLYMARKET HAS ALSO BROUGHT ON A NEW CHIEF GROWTH OFFICER, THE FORMER C-SUITE EXECUTIVE AT LYFT AND HEAD OF DRIVER GROWTH INTERNATIONALLY. HE HAS RELOCATED TO HELP RESHAPE THEIR MARKETING PUSH THAT HAS COME UNDER SCRUTINY IN POLYMARKET. DANI: THANK YOU VERY MUCH, TODD GILLESPIE REPORTING ON POLYMARKET'S BIG FUNDRAISER. APOLLO REPORTING RECORD REVENUE FROM FEES. LAURA BONITA AS HAS BEEN FOLLOWING THIS STORY AND SHE JOINS US NOW. IT FEELS THAT IN THE WORLD OF PRIVATE CAPITAL GIANTS THE BIGGER JUST CONTINUE, THE BIG CONTINUE TO JUST GET BIGGER. >> THAT'S RIGHT AND THIS WEEK WAS PROOF OF THAT. WE SAW FEES FROM MANAGEMENT FEES AND A LOT OF THAT CAME FROM THE CAPITAL SOLUTIONS BUSINESS. THAT IS WHY WE HAVE SEEN SOME OF THE BIG INVESTMENT GAIN LOANS BEING ORIGINATED IN THE LAST YEAR OR SO. THERE WAS A BIG BROADCOM DEAL THAT CAME FROM THE CAPITAL SOLUTIONS BUSINESS. THE REVENUE FROM THAT DEFINITELY DRIVING GROWTH. DANI: IT'S INTERESTING TO LOOK AT ALL THE DIFFERENT GIANTS AND BUSINESSES THAT ARE DOING WELL. I SPOKE WITH CARLISLE AND BROOKFIELD THIS MORNING. BOTH REPORTING EARNINGS SAYING LOOK AT THE HUGE AMOUNT OF FUNDRAISING WE ARE DOING. KKR RAISING THEIR BIGGEST INFRASTRUCTURE FUND. I WONDER HOW MUCH OF THE EXCITEMENT IS AROUND A GUY STRATEGIES AND THAT IS WHY THEY ARE ABLE TO RAISE SOME MUCH MONEY. >> IT IS VERY ACTIVE AND VERY REAL RIGHT NOW. MY COLLEAGUE REPORTED ON THIS HUGE FUNDRAISER EARLIER THIS WEEK AND IT IS SO INTERESTING BECAUSE FOR ALL THE WORRIES AND CONCERNS THAT ARE ALSO VERY REAL , THEY ARE ABLE TO GO MAKE THESE BIG DEALS AND RAISE HUGE AMOUNTS OF CAPITAL FOR AT. WHILE INVESTORS ARE DIGESTING THEY ARE STILL WILLING TO ALLOCATE AND I THINK THE KEY IS DIVERSITY AS WELL. THE FUND HAS THREE DIFFERENT STRATEGIES. THEY ARE LOOKING FOR AS DIVERSE A PORTFOLIO IS POSSIBLE THAT WILL HEDGE THE RISK FROM JUST PURE AI INFRASTRUCTURE. DANI: LAURA, FANTASTIC REPORTING. WE TALK ABOUT ACTIVIST INVESTING IN NAVIGATING THESE MARKETS WITH THESE VERY BIG BOUTS OF VOLATILITY. JEFF SMITH, THE HEAD OF STAR BOARD VALUE WILL DISCUSS WHAT HE IS SEEING IN THE SPACE. YOU ARE WATCHING "BLOOMBERG DEALS." ♪ DANI: STARBOARD VALUE, WORTH OVER $9 BILLION IN ASSETS, HAS LAUNCHED ACTIVIST CAMPAIGNS AND SOME OF THE WORLD'S LARGEST COMPANIES. IT HAS TAKEN STAKES IN TRIP ADVISOR AND CARMAX. SO PLEASED TO SAY THAT THE CEO JEFF SMITH JOINS US NOW TO LOOK AT ACTIVISM IN THE BIG PICTURE. THANK YOU FOR JOINING. JEFF: IT'S GOOD TO BE HERE. DANI: GREAT TO HAVE YOU HERE. IT HAS BEEN TO AND HALF MONTHS SINCE HER LAST POSITION WITH FLOWS OR. ANY NEW CAMPAIGNS OR POSITIONS YOU HAVE? JEFF: THE MARKET HAS BEEN REALLY INTERESTING THIS YEAR. IT HAS BEEN MORE OF A STOCK PICKERS MARKET. YOU SEE THE LAST COUPLE DAYS, WE HAVE STOCKS THAT HAVE BEEN MOVING ON EARNINGS IN BOTH DIRECTIONS. IT MAKES IT A GREAT TIME FOR A VALUE INVESTOR TO COME IN AND BUY POSITIONS AT OPPORTUNISTIC PRICES AND GET INVOLVED AND SEE IF WE CAN MAKE A DIFFERENCE AND IMPROVE THE BUSINESSES AND CREATE VALUE. THIS HAS BEEN A LOT OF FUN THIS YEAR. DANI: WHERE HAVE YOU FOUND THAT VALUE NOW? JEFF: WE HAVE A NEW NAME THAT I WOULD LIKE TO TALK ABOUT TODAY. WE HAVE BEEN ACTIVE IN RESTAURANTS THROUGHOUT OUR CAREER. I THINK WE ARE MOST KNOWN FOR DARDEN RESTAURANTS, BUT THERE'S BEEN OTHERS, PAPA JOHN'S, OF RESTAURANT CHAINS. WE ARE INVESTED IN OTHER RESTAURANTS. WE ARE IN SHAKE SHACK, WHICH WE ARE VERY EXCITED ABOUT. DANI: HOW SIGNIFICANT IS YOUR POSITION? JEFF: WE ARE ECONOMICALLY ONE OF THE LARGER SHAREHOLDERS, MAYBE THE LARGEST ACTIVE SHAREHOLDER, SEVERAL HUNDRED MILLION DOLLARS. WE ARE REALLY EXCITED. AN EXAMPLE OF THIS YEAR OF STOCK THAT IS DISLOCATING MAY BE MORE THAN IT SHOULD. AFTER FIRST-QUARTER EARNINGS, THE STOCK CAME DOWN FROM 90 TO 55, 60. WHEN YOU LOOK AT THE QUALITY OF THIS BUSINESS AND HOW GREAT A BUSINESS IT IS, HOW MUCH IT IS GROWING, HOW MANY NEW STORES CAN OPEN, IT'S JUST TOO CHEAP. IF YOU LOOK TO A WHOLE SWATH OF RESTAURANT COMPANIES AND YOU KIND OF MEASURE HOW FAST ARE THEY GROWING COMPARED TO WHERE THE EBITDA MULTIPLE IS AND YOU DREW A LINE, YOU SHOULD BE GETTING A RELATIONSHIP BETWEEN GROWTH AND MULTIPLE. THE FASTER GROWING ONES SHOULD HAVE HIGHER ONES AND SLOWER ONES LOWER MULTIPLES, LIKE ANY OTHER INDUSTRY. SHAKE SHACK JUST DOESN'T MAKE SENSE. WE ARE ABLE TO OWN SHAKE SHACK AT ROUGHLY 10 TIMES EBITDA, AND THE MULTIPLES SHOULD BE TWICE THAT GIVEN THAT IT IS GROWING MIDTEENS. ONE OF THE FASTEST GROWERS, HIGH-QUALITY BRAND, HIGH-QUALITY RESTAURANT. DANI: TO YOUR POINT, YOU AND THE TEAM AT STARBOARD ARE LEGENDARY WITH WHAT YOU HAVE DONE IN THE RESTAURANT SPACE, COMING IN AND SWEEPING THE BOARD. I DON'T THINK ANYONE WILL EVER FORGET YOUR REPORT ON OLIVE GARDEN AND LACK OF SALTY PASTA WATER. YOU MENTIONED PAPA JOHN'S. YOU ARE MAKING OPERATIONAL CHANGES FOR THIS RESTAURANTS. WHEN YOU LOOK AT SHAKE SHACK, ARE THERE OPERATIONAL CHANGES THEY SHOULD BE MAKING AND THAT YOU WOULD PUSH TO MAKE? JEFF: WELL, YOU KNOW, THIS ONE IS EVEN MORE INTERESTING, AND MAY SLIGHTLY EASIER. I DON'T THINK THERE ARE MASSIVE OPERATIONAL CHANGES. DANI MEYER'S LEGENDARY IS THE FOUNDER. THE CEO IS ROB LYNCH. ROB WAS THE CEO WE HIRED AT PAPA JOHN'S TO RUN PAPA JOHN'S WHEN I WAS THE CHAIR OF PAPA JOHN'S. I KNOW ROB WELL, HE IS A TERRIFIC OPERATOR. SHAKE SHACK IS RUN REALLY, REALLY WELL. HE HAS DONE A GREAT JOB OF LOWERING THE COST TO BUILD A NEW SHAKE SHACK. AND THE IMPORTANCE OF THAT IS THE RETURNS ON A NEW RESTAURANTS GO OUT. IF YOU CAN HAVE AMONG THE BEST RETURNS ON A NEW RESTAURANT, IT MAKES IT EASIER TO JUSTIFY BUILDING MORE AND MORE RESTAURANTS, WHETHER YOU DO IT YOURSELF OR YOU HAVE A FRANCHISEE DO IT. THE OPPORTUNITY HERE ISN'T SO MUCH OPERATIONAL. WE THINK THEY DO A GREAT JOB THERE. THE OPPORTUNITY IS TO CONTINUE MIDTEENS GROWTH AND ACCELERATE IT EVEN FURTHER. THEY HAVE ABOUT 400 RESTAURANTS, OWNED RESTAURANTS IN THE U.S. THEY HAVE A TARGET OF 1500. WE THINK IT COULD BE 2500, BUT THEY HAVE A TARGET OF 1500. THEY HAVE LIMITED THEMSELVES TO DOING IN THE U.S. ONLY OWNED RESTAURANTS, AND THEY HAVEN'T BEEN WILLING TO FRANCHISE, EVEN THOUGH THEY FRANCHISE INTERNATIONALLY AND THEY FRANCHISE NONTRADITIONALLY IN AIRPORTS AND STADIUMS. BUT IN THE U.S. THEY HAVE CHOSEN FROM WAY BACK WHEN THAT THEY WANT TO OWN THE ECONOMIC AND CONTROL THE OUTCOME. BUT THEY HAVE PROVEN THAT THEY CAN HAVE DEPENDENT OPERATORS OPERATE THE RESTAURANTS BY DOING IT AND IN NONTRADITIONAL AREAS. WE WOULD LIKE THEM TO LAYER ON FRANCHISING IN THE U.S. IN ADDITION TO GROWING THEIR OWN STORES. IF THEY DO THAT, WE THINK IT COULD MAKE A MATERIAL DIFFERENCE IN THEIR GROWTH RATE AND THEY CAN GET TO THEIR 1500-STORE TARGET IN THE SEVEN YEARS INSTEAD OF 12 YEARS. A BIG DIFFERENCE, WHICH CRATES A LOT OF VALUE. NOT ONLY GROWTH RATE AND MULTIPLE, WE THINK THEY ARE VALUED AT HALF OF WHERE THEY SHOULD BE, BUT IF YOU CAN MOVE THE GROWTH RATE HIGHER, YOU GET EVEN MORE OPPORTUNITY. DANI: AND SOME OF THEIR PEERS, AND I AM ASSUMING THEY ARE TRADING AT A SHAREPOINT MULTIPLE HIGHER THAN SHAKE SHACK, THE MODEL IS WELL TESTED. WHY DO YOU THINK SHAKE SHACK HASN'T ALREADY GONE THERE? DO YOU THINK IT IS SOMETHING THEY ARE RESISTANT TO, OR DO YOU THINK IT IS SOMETHING THEY WILL EASILY TAKE ON BOARD? JEFF: I THINK IT'S A GOOD DISCUSSION. THEY AREN'T RESISTANT TO IT, BECAUSE THEY HAVE DONE IT INTERNATIONALLY. IF YOU GO BACK HISTORICALLY BASED ON THE CONVERSATIONS I HAVE HAD WITH THEM, EARLY ON THEY HAD A DISCUSSION ABOUT WHETHER THEY SHOULD GROW THROUGH FRANCHISING OR OWN THEIR OWN RESTAURANTS. THEY DECIDED VERY EARLY ON THEY WANTED TO OWN THEIR RESTAURANTS, TO CONTROL THE QUALITY. THIS IS A HIGH-QUALITY BRAND. THEY COOK EVERYTHING TO ORDER, IT IS REAL FOOD. THIS IS A GOOD QUALITY BUSINESS. THEY WANTED TO CONTROL THE INTEREST AND THE QUALITY. GREAT DECISION, THEY'VE DONE AN AMAZING JOB WITH THAT, TERRIFIC DECISION. FAST-FORWARD TO WHERE WE ARE NOW CAN WE HAVE PROVEN WE CAN BUILD 400 RESTAURANTS. THEY ARE GROWING THE NUMBER OF RESTAURANT THEY CAN BUILD BY THEMSELVES. 65 THIS YEAR, LAST YEAR THEY DID 40 SOMETHING. AND THEY HAVE PROVEN THAT INDEPENDENT OPERATORS ACTUALLY CAN COOK THEIR FOOD TO THEIR STANDARDS INTERNATIONALLY AS WELL AS NONTRADITIONAL RESTAURANTS. THEY HAVE ALREADY DONE THAT. AS TO WHY THEY'RE NOT WILLING TO DO THAT IN THE U.S. AS OF YET, I THINK IT IS A MATTER OF TIME. I THINK IT IS A GOOD CONVERSATION TO HAVE. I THINK THEY NEED TO FIGURE OUT HOW TO BE ABLE TO DO BOTH. TAKE AREAS YOU WANT TO DENSIFY AND OWN AND YOU OWN THOSE, IN THE AREAS YOU WEREN'T GOING TO GET YOU ON THE ROADMAP FOR FOR CONFLICT, 6, 7, 8, 9 YEARS-- FOUR , FIVE, SIX, SEVEN, EIGHT, NINE, YEARS, ATTACK THOSE MARKETS YOU WEREN'T GOING TO GET TO FOR EIGHT YEARS ANYWAY SO WE CAN IMPROVE THE GROWTH RATE. IF YOU RUN THE MATH, IT IS A HIGHER RETURN FOR SHAREHOLDERS. IT IS A GOOD DISCUSSION. DANI: SOME OF YOUR OTHER STAKES -- YOU KNOW THIS INDUSTRY WELL -- LIAM WESTON IS A BIG ONE, WHICH MAKES FRIES FOR MCDONALD'S AND MAYBE SOON SHAKE SHACK, IF THEY ARE NOT ALREADY. YOU TALKED ABOUT THEM REDUCING COSTS, DRIVING GROWTH BEYOND RAISING PRICES. HAVE THINGS BEEN PRODUCTIVE SINCE TAKING HER ACTIVIST CAMPAIGN WITH THEM? JEFF: LIAM WESTON FRENCH FRIES -- IN ESSENCE THEY ARE RELATED. WE BELIEVE IT DOESN'T SUPPLY SOME TO SHAKE SHACK. THEY ARE NOT - -DOES SUPPLY SOME TO SHAKE CHECK. THEY ARE NOT A SOLE SUPPLIER. ONE OF THE PREMIER FRENCH FRY COMPANIES. IT IS A BUSINESS THAT HAS A MOAT AROUND IT. THERE ARE ONLY SO MANY PLAYERS THAT CAN MAKE FRENCH FRIES. SO IT'S A BEAUTIFUL THING. WHEN THEY MADE THE INVESTMENT, THEY HAD COME ON HARDER TIMES WHEN THEY HAD EXPANDED TO QUICKLY AND AT SUPPLY ISSUES. THEY WERE KIND OF IN THE PENALTY BOX. WHAT HAS HAPPENED SINCE AND IS WE HAVE GOTTEN INVOLVED AND THEY HAVE ELEVATED THEIR CEO AND BOUGHT A NEW EXEC CHAIR, WHICH WE ARE EXCITED ABOUT. THEY'VE BEEN SEEKING BETTER. THE STOCK HAS PERFORMED BETTER AND THEY HAVE GOTTEN VOLUMES BACK AND THEY ARE STARTING TO RAISE THEIR PRICE. EARNINGS HAVE STABILIZED. WE HAVE HAD CONVERSATIONS WITH THEM RECENTLY ABOUT HOW WE HAVE TO IMPROVE THE EARNINGS GROWTH TRAJECTORY TO GET TO SUSTAINABLE EARNINGS GROWTH OUT OF THE BUSINESS. BUT WE ARE SUPER EXCITED ABOUT WHAT IS AHEAD FOR WESTON AND THE WHOLE RELATIONSHIP IS TERRIFIC. DANI: YOU FEEL CONFIDENT THAT THINGS ARE MOVING IN THE RIGHT DIRECTION. WOULD YOU SAID THE SAME WITH CARMAX? THEY HAVE MADE FOR CHANGES, TO-- BORDER CHANGES, TOO. JEFF: WE TALKED A LOT ABOUT CARMAX LAST TIME. DANI: SO WE NEED AN UPDATE. JEFF: CARMAX IS FUN. WE WERE ABLE TO BUY AT BOOK VALUE, WHICH DIDN'T MAKE ANY SENSE TO ME. IN HINDSIGHT IT SEEMS LIKE IT MADE SENSE BECAUSE IT DOES WORK. AND ACHIEVE MULTIPLE OF EARNINGS AND CASH FLOW-- A CHEAP MULTIPLE OF EARNINGS AND CASH FLOW. WHAT THEY NEEDED TO DO WAS TO GET THEIR SHARE BACK AND DO THAT BY GETTING THE PRICE TO CONSUMERS DOWN WHILE BEING ABLE TO HOLD THEIR GROSS PROFIT. THEY WERE RUNNING THEIR BUSINESS KIND OF BACKWARDS BEFORE, WHERE THEY WERE RUNNING IT BASED ON GROSS PROFITS. THE WAY THEY WERE RUNNING IT BEFORE AS THEY WOULD BUY CARS, SPEND MONEY TO REFURBISH THEM, AND ADDED $2000 ON TOP OF THE COST. PROBLEM WAS THEY WERE INEFFICIENT ON BUYING AN INNOVATION ON REFURBISHMENT, WHICH MEANT THAT--AND INEFFICIENT ON REFURBISHMENT, WHICH MEANT THAT WHEN YOU ADDED $2000 TO THE PRICE OF THE CAR, THE MARKET PRICE WAS TOO HIGH. HOW DO YOU GET THAT DOWN TO THE RIGHT LEVEL SO YOU CAN GET YOUR SHARE BACK AND GAIN SHARE BUT KEEP YOUR MARGIN? THE WAY YOU DO THAT IS YOU GET MORE EFFICIENT IN BUYING CARS AND REFURBISHING CARS. THEY BROUGHT IN A GREAT NEW CEO, WHO'S HONESTLY BEEN GETTING UP TO SPEED WAY FASTER THAN I WOULD'VE EXPECTED, AND WE ARE PRETTY EXCITED ABOUT IT. THEY BROUGHT ON SOME NEW BOARD MEMBERS INCLUDING SOME WE RECOMMENDED. THEY ARE STARTING TO HIT THEIR STRIDE. WE ARE VERY EXCITED ABOUT WHAT IS HAPPENING WITH SOME OF THE DATA WE HAVE BEEN LOOKING AT, WHICH LOOKS REALLY GOOD. I THINK THEY SHOULD BE ABLE TO GAIN MOMENTUM THAT I STILL DON'T UNDERSTAND WHY THEY A-- THEIR OMNI-CHANNEL BUSINESS SHOULD BE BETTER THAN CARVANA'S OMNI-CHANNEL BUSINESS, BECAUSE THEY HAVE ALL OF THESE LOTS IN ADDITION TO BEING ABLE TO BUY OR SELL OCCUR DIGITALLY. IF I WERE WANTING TO BUY A CAR I WOULD WANT TO SEE IT AND TOUCH IT AND SMELL IT. HAVING THAT OPTIONALITY THAT YOU DON'T HAVE TO PAY FOR BECAUSE THE STOCK IS SO CHEAP MAKES IT A GREAT INVESTMENT. DANI: THIS IS THE COMMON THEME BETWEEN ALL OF THESE AND KIND OF WHERE WE STARTED, JEFF. A LOT OF THESE OPPORTUNITIES HAVE BEEN CHEAP. BUT IT IS NOT A MARKET WHERE THINGS ARE DISCOUNTED. IT IS A MARKET THAT IS REALLY VOLATILE. WE HAVE SEEN HUGE SWINGS IN THIS MARKET, WHETHER BECAUSE THEY REPORT EARNINGS, WHETHER BECAUSE JEFF SMITH ANNOUNCES A NEW POSITION. HOW DOES THAT CHANGE YOUR INVESTMENT THESIS, WHERE THINGS AREN'T JUST CHEAP, BUT THEY ARE JUMPING AROUND A LOT? JEFF: LOVE IT. STAY DISCIPLINED. IT IS WHAT WE DO AS VALUE INVESTORS, PLUS A CATALYST. WE WANT STOCK-SPECIFIC VOLATILITY, AND WHAT WE WILL DO IS WHEN IT GETS REALLY OPPORTUNISTIC, WE WILL BUY IT, AND IF HE GETS MORE OPPORTUNISTIC, WE WILL BUY MORE OF IT AND START MAKING A CASE FOR CHANGE TO BE A CATALYST. AS THE STOCK MOVES HIGHER, WE WILL CONTINUE TO EVALUATE HOW IT IS VALUED VERSUS THEIR PEERS AND POTENTIAL AND WHAT CAN HAPPEN, VERSUS THE EARNINGS POWER, WHERE WE ARE GOING. JUST LIKE ANY OTHER GOOD INVESTOR, YOU MIGHT SELL SOME, YOU MIGHT BUY SOME AGAIN. THAT VOLATILITY, IF YOU CAN CAPTURE IT AND BE DISCIPLINED, IS A GREAT THING FOR AN ACTIVIST, ACTIVE INVESTOR. DANI: THAT IS ALL WE HAVE TIME FOR. THANK YOU SO MUCH FOR JOINING, JEFF SMITH, STARBOARD CEO. WE WILL BE OUT TO SHAKE SHACK TO GET COMMENTS. YOU ARE WATCHING "BLOOMBERG DEALS." DANI: YOU ARE WATCHING "BLOOMBERG DEALS" WITH DANI BURGER AND SCARLET FU. UP NEXT, PRIVATE EQUITY FUNDING WHICH $463 BILLION IN THE FIRST HALF, DRIVEN BY AI MEGA ROUNDS. WE WILL DIVE INTO THE DETAILS COMING UP NEXT. DANI: LET'S GO TO SCARLET FU THIS EVENING TAKING A CLOSER LOOK AT HOW THE AI FRENZY HAS HELPED SPLIT WINNERS AND THE HAVE-NOTS. SCARLET: SPENDING BY VC FIRMS IS FALLEN SHARPLY SINCE THE PANDEMIC FROM ALMOST 400 16 BILLION BACK IN 2022. HIGHER INTEREST RATES, DEFLATED STARTUP VALUATIONS OF SHUT THE IP WINDOW. MAKING IT TOUGHER TO RETURN MONEY TO SHAREHOLDERS WHICH SLOWED DOWN FUNDRAISING. NOW INVESTORS WANT ACCESS FOR EARLY STAKES IN TOP-TIER AI COMPANIES. MONEY FLOWS DISPROPORTIONATELY TO THE FOUNDERS FUND WHILE SMALLER SECTOR FOCUSED FUNDS STRUGGLE TO RAISE FUNDS. PERFORMANCE IS BECOMING MORE UNEVEN. A WIDENING GAP BETWEEN THE TOP 10% OF 2020 FOUR VINTAGE FUNDS UP ABOUT 49% WHILE THE BOTTOM QUARTILE IS DOWN. A DISTINCT K-SHAPED IS FORMING. DANI: THAT BRINGS US TO THIS ALTERNATIVE VIEW. BOARD DEBATES IN REAL TIME JOINING US IS THE MANAGING DIRECTOR AT SALESFORCE VENTURES. DANIEL, MANAGING DIRECTOR AT DELL TECHNOLOGIES CAPITAL AND COFOUNDER AND MANAGING PARTNER AT BREAK UP VENTURES. I WOULD LOVE TO KNOW WHAT YOU ARE LOOKING AT. I THINK WE CAN ALL JUST SAY OPERATING IN THE AI UNIVERSE WHEN IT COMES TO VENTURE CAPITAL. I WOULD LOVE TO KNOW WHAT PART OF THE ECOSYSTEM YOU THINK IS MOST APPEALING. WHAT AN TO OFF EMILY. EMILY: OVER THE LAST TWO TO FOUR YEARS WE HAVE BEEN ACTIVELY INVESTING IN THE INFRASTRUCTURE PLAY OR OF THE AI WAVE INCLUDING COMPANIES LIKE ANTHROPIC, TOGETHER AI, RUNWAY AND MANY MORE. LOOKING FORWARD WHAT WE ARE MOST EXCITED ABOUT IS BRINGING AI TO THE PHYSICAL WORLD WHICH IS A LOT HARDER THAN BRINGING AI TO THE DIGITAL WORLD. THAT’'S WHY WE ARE EXPANDING TO BE INVESTING IN ROBOTICS. DANI: JULIA LET ME BRING YOU END, THE FEELING YOU MIGHT THINK SOMETHING SIMILAR. IS THE NEXT WAVE THE MOST ATTRACTIVE OPPORTUNITY. JULIA: WE ARE IN EARLY STAGE INVESTMENT AND WE FOCUS ON THE FRONTIER SCIENCE AND TECHNOLOGY SO THE FISCAL WORLD'S CELL BIOLOGY, CHEMISTRY A LITTLE BIT DIFFERENT INCLUDING ROBOTICS. WHEN WE THINK ABOUT WE WATCH THIS MASSIVE AI INFRASTRUCTURE PLAY OUT OVER THE LAST COUPLE OF YEARS AND THAT NEXT WAVE GOES TO WHOEVER HAS PROPRIETARY DATA AND DURABLE NODES SO THE SUB -- THE AREAS WE OPERATE IN, THOSE ARE SECTORS THAT GENERATE MASSIVE PROPRIETARY DATA. REGULATED MARKETS AND THEY ARE FULL OF INEFFICIENCIES THAT ARE STILL WAITING. DANI: DANIEL, WHAT ARE YOU LOOKING AT? DANIEL: THANK YOU FOR HAVING ME TODAY. WE ARE AN EARLY STAGE VENTURE CAPITAL FUND VERY ENTERPRISE FOCUSED SO CYBERSECURITY, AI DEVELOPER TOOLS, EVERYTHING IN THE DATA. AND OF COURSE A WORLD OF AI TODAY. WITHIN AI A FEW AREAS ARE GETTING A LOT OF ATTENTION IN PART BECAUSE THERE ARE HUGE AMOUNTS OF DOLLARS THAT WAS MENTIONED BY EMILY WHICH IS THE INFERENCE AND THE COMPUTE INFRASTRUCTURE WOULD PROVIDE INFLUX OF TRAINING. SHIFTING LOOKING BACK GOING FORWARD AND OF COURSE THE OTHER REALLY BIG AREAS REINFORCEMENT LEARNING WHICH IS THE WHOLE CATEGORY OF USING DATA TO HELP ALL THE MODELS IMPROVE AND GET SMARTER AND SMARTER. DANI: WHAT IS A RISK TO THE UNIVERSE THE LARGE LLM'S JUST KIND OF DO IT THEMSELVES. WHY WOULD AN INDEPENDENT STARTUP BE ABLE TO DO SOMETHING LIKE THAT BETTER THAN THESE LARGE ESTABLISHED COMPANIES? DANIEL: THERE'S A COUPLE OF RISKS IN TERMS OF INVESTING IN THE SPACE RIGHT NOW. IT FEELS AGREE OR IN A MASSIVE WAVE SO EVERYTHING IS BEING PRICED TO PERFECTION OR PRICED AS IF EVERYTHING WILL BE THE ULTIMATE WINNER. THERE CAN ONLY BE A FEW ULTIMATE WINNERS. IT IS ALWAYS EXISTED IN VENTURE CAPITAL IN MOST INDUSTRIES. I THINK THE BIG RISK IS THERE WILL BE A FEW WINNERS AND THERE WILL BE MANY COMPANIES THAT ARE NOT ABLE TO SORT OF GET TO THE FINISH LINE. BUT THERE IS A GREAT OPPORTUNITY TO DO THINGS IN AND AROUND THE LARGE MODEL COMPANIES. AND A LOT OF THINGS WE ARE TALKING ABOUT THE LARGE MODEL COMPANIES ARE IN FACT THE LARGEST CUSTOMERS OF MOST OF THESE COMPANIES. DANI: WHAT YOU THINK OF THIS IDEA THAT EVERY THING IS PRICED TO PERFECTION. IS THERE ENOUGH DIFFERENTIATION IN VALUATIONS ACROSS THE AI UNIVERSE? EMILY: HISTORICALLY SPEAKING VALUATIONS HAVE BEEN RELATIVELY HIGH FOR THE BEST COMPANIES IN THE START UP SPACE. THOSE COMPANIES COMMAND A PREMIUM. AND THEY MAY BE SLIGHTLY AHEAD IN TERMS OF COMMERCIAL ATTRACTION. EVALUATION IT COMES TO ATTRACTION. IT IS VERY MUCH BETTING ON THE FOUNDERS WITH A VISION OF GENERATIONAL OUTCOMES SO PAYING UP FOR THE BEST OUTCOMES IS WORTH IT AND WE STILL HAVE THE SAME LEVEL WHEN IT COMES TO LOOKING AT THE TYPE OF INVESTMENTS WE ARE MAKING IN THE AI SPACE, THE SIZE OF THE MARKET OPPORTUNITY AND ATTRACTIVE RETURN PROFILE. DANI: JULIA HOW DO YOU SEE THIS DEBATE OVER VALUATION SHAKING UP? JULIA: THE VALUATION PIECE IS HARD BECAUSE OF SOME THINGS AREN'T SUCCESSFUL AND IT'S PRICED IN, IS THAT REALLY VENTURE IN ITS TRADITIONAL SENSE? WE THINK ABOUT WHAT IS CORE TO THE VENTURE ROLE IS REALLY THAT FIRST PRINCIPLES THINKING UNDERWRITING WHAT IS CONTRARY IN TODAY BUT MASSIVE TOMORROW. AND HOW MUCH TIME DO YOU HAVE TO PRICE SOMETHING BEFORE 80'S OBVIOUS OR INEVITABLE IS REALLY THE QUESTION. AND AS EARLY-STAGE INVESTORS ARE TRYING TO GET IN EARLY IT REALLY REQUIRES US TO COME IN WITH A PREPARED MIND ABOUT WHAT IS CONTRARY NOW BUT MASSIVE LATER IN OUR SPACE, OBVIOUSLY WE HAVE BEEN TALKING ABOUT THE PHYSICAL WORLD A LITTLE BIT BRINGING THAT PLAYBOOK THAT WORKS FOR LANGUAGE. THERE NO INTERNET TO TRADE ON. WE DON'T EVEN KNOW THE MECHANISM LET ALONE HAVE IT CAPTURED WHEN YOU'RE TALKING ABOUT BIOLOGY AND CHEMISTRY. I THINK THAT IS AN EXAMPLE OF WHERE WE HAVE A CONTRARIAN VIEW EARLY. DANI: DOES THAT MEAN SOME OF THIS INDUSTRY MAYBE HAS LOST ITS WAY AND IS KIND OF FOLLOWING THE PACK WHEN IT COMES TO A HIGH? JULIA: I WILL HAVE A SPECIFIC ANGLE ON THE WORLD OF AI BECAUSE WE WORK SO MUCH IN THE PHYSICAL WORLD AND WITH CELLS AND BIOLOGY. I THINK WHAT MAY BE IS WORTH NOTING IS A LITTLE BIT OF THAT PREPARED MIND EARLY OF WHERE SPACE IS GOING VERSUS WHAT YOU MIGHT SEE, SOMETHING I'VE NOTICED IN THE SPACE OF INVESTING THE LAST 20 YEARS AND YOU DO NOTICE A LOT MORE OF THE MOMENTUM PLAY AS YOU GET INTO THE MID AND LATER STAGE ROUNDS. WHERE IT IS YOU HAVE A LITTLE BIT OF A HARDER TIME IN THE EARLY STAGE WHERE IF THE INVESTOR HASN'T BUILT THEIR CONVICTION YET, THE SPACE IS MOVING FASTER THAN THEY CAN DO WORK. THEY KIND OF WAIT FOR THE SIGNAL AND THAT SIGNAL IS PRICED IN BY THE TIME YOU GET TO THOSE. DANI: EMILY CAN I GET YOUR TAKE ON THAT IDEA OF THE MOMENTUM FOLLOWING THE INDUSTRY. EMILY: I THINK I DEGREE -- DISAGREE SLIGHTLY. I DO THINK THE PACE HAS DRAMATICALLY INCREASED OVER THE LAST THREE TO FOUR YEARS BECAUSE THEY ARE ALLOWING STARTUPS TO ACHIEVE THEIR PRODUCT IN COMMERCIAL MILESTONES A LOT FASTER THAN THE PREVIOUS GENERATION OF STARTUPS. HISTORICALLY EVEN THOUGH WE MIGHT BE INVESTING AT A LATER STAGE FROM A TIMING PERSPECTIVE. IT FEELS MUCH EARLIER. I AGREE IN TERMS OF HAVING THE PREPARED MIND WE ARE CONSTANTLY LOOKING AT WHAT IS THE NEXT FRONTIER, WHAT IS THE NEXT THEMATIC AREA WE SHOULD BE LOOKING AT. BECAUSE WE ARE IN THE LATER STAGE THERE'S A LOT MORE CUSTOMER WORK THAT WE CAN BE DOING TO GET THE RIGHT FEEDBACK AND THEIR SECRET SAUCE HAS OUR OWN VERY LARGE CUSTOMER BASE AND HELPED PRESSURE TEST THAT PRODUCT. DANI: I HATE TO DO THIS DANIEL BUT WHERE ARE YOU ON THIS DEBATE OF MOMENTUM? DANIEL: IT'S REALLY IMPORTANT TOPIC WHICH IS THE AMOUNT OF TIME THE VENTURE CAPITAL INVESTORS HAVE TO DO CONVICTION ON INVESTMENT AND A FOUNDER ESPECIALLY US EARLY-STAGE INVESTORS WHO SEE A COMPRESSED DRAMATICALLY JUST LIKE THE TIME TO GROW AND AI COMPANY AND GET TO SCALE IS PRESSED DRAMATICALLY. YOU REALLY HAVE TO LEVERAGE OUR EXPERT NETWORKS AND LEVERAGE OUR RELATIONSHIPS WITH DELL TO HELP US GET CONVICTION ABOUT EARLY-STAGE FOUNDERS AS FAST AS POSSIBLE. >> THANK YOU ALL SO MUCH FOR JOINING. A PLEASURE TO HAVE YOU ALL ON. DANIEL DR. AT DELL TECHNOLOGY CAPITAL AND JULIA MOORE AT BREAKOUT VENTURES. A QUICK CHECK ON SHAKE SHACK PRICES IN CASE YOU MISSED IT. JUST SPEAKING WITH JEFF SMITH IN THE PAST COUPLE MOMENTS ANNOUNCING A NEW STAKE IN THE FAST FOOD COMPANY. HE SAYS HE IS LIKELY THE LARGEST ACTIVE HOLDER OF SHAKE SHACK. AT THE MOMENT. SAYING THE POSITION IS SEVERAL HUNDRED MILLION DOLLARS. HE SAYS A BIG PART OF HIS THESIS WAS THAT SHAKE SHACK IS TREATING CHEAPLY BUT ALSO PUSHING THEM TO ADOPT MORE FRANCHISE MODELS IN ORDER TO GROW THAT STAR BOARD KNOWS WELL HAVING DONE LEGENDARY CAMPAIGNS. WE WILL KEEP AN EYE ON THE SHARES. AGAIN ONE OF THE MANY REASONS WHY THIS SHOW IS A MUST WATCH. THE MEGADEAL'S PIPELINE HAS BEEN ROBUST THIS YEAR PUSHING ACTIVITY TO NEAR RECORD LEVELS. WE SPEAK WITH KIMBERLY AND WILL SPEAK TO THE CURRENT UPTICK THAT SHE IS SEEING. YOU'RE WATCHING BLOOMBERG DEALS. DANI: YOU ARE WATCHING "BLOOMBERG DEALS." I AM DANI BURGER. 2026 IS SHAPING UP TO BE THE YEAR OF THE MEGA DEAL. SPACEX WITH XAI, PARAMOUNT MAKING A BID FOR WARNER BROS., JUST TO NAME A FEW. EARLIER THIS HOUR WE WERE DISCUSSING THE POTENTIAL OF THE BIGGEST PHARMA DEAL EVER WITH ASTRAZENECA AND BRISTOL-MYERS. WE WANTED TO HEAR FROM SOMEONE WHO ADVISES PUBLIC AND PRIVATE COMPANIES ON COMPLEX M&A, BECAUSE COMPLEX IT HAS BEEN. THE GLOBAL COHEAD OF M&A JOINS US NOW. >> GREAT TO BE HERE, THANKS SO MUCH. DANI: DEAL VOLUME HAS BEEN PICKING UP, BUT HOW UNEVEN IS IT? IS IT CONCENTRATED IN THE TOP OF DEALS WE HAVE SEEN THIS YEAR? >> FOR SURE, DANI. IF YOU LOOK AT THE YEAR-OVER-YEAR NUMBERS, MEGA DEALS $10 BILLION OR PLUS IS THE NAME OF THE GAME. EVERYONE IS CHASING SCALE AND WE ARE SEEING THE U.S. BE THE DOMINANT PLAYER IN THE MARKET AND STRATEGIC BE THE DOMINANT PLAYER AMONG PRIVATE EQUITY. DANI: WHAT IS DRIVING THAT? REGULATORY, SOMETHING ELSE, CHEAP STOCKS TOO GOOD OF AN OPPORTUNITY? KIMBERLY: OPPORTUNITY COSTS, ACTUALLY. STRATEGICS ARE CHASING SCALE OF THE MOMENT AND THEY SEE THE COST OF WAITING AS FAR GREATER THAN THE COST OF OVERPAYING FOR ASSETS THAT COULD FUEL TRANSFORMATIONS. DANI: WHAT IS THE COST OF WAITING? OWHAT ARE THEY TRYING TO AVOID FALLING OFF INTO? KIMBERLY: THE TWO BIGGEST SECTORS SO FAR THIS YEAR HAVE BEEN TECH AND ENERGY. THOSE ARE WHAT IS REALLY DRIVING. PEOPLE ARE CHASING AI, THIS DIGITAL AND AI TRANSFORMATIONAL REVOLUTION. AND AI NEEDS POWER AND POWER AT SCALE, WHICH BRINGS TOGETHER THE INTERSECTION OF ENERGY, TECH, AND INFRASTRUCTURE. DANI: HAS THE REGULATORY ENVIRONMENT -- I WAS SPEAKING TO SOMEONE AND ONE OF THE REASONS THEY SAID IT WAS HAPPENING SO QUICKLY'S GET YOUR DEAL DONE NOW, YOU DON'T KNOW WHAT CONGRESS WILL LOOK LIKE AFTER THE MIDTERM FOR THE MOMENT IT IS A WHITE HOUSE AND ADMINISTRATION THAT IS MORE FRIENDLY TO THESE LARGER-SCALE DEALS. KIMBERLY: DEALS ARE DEFINITELY GETTING DONE. THE REGULATORY ENVIRONMENT AT THE FEDERAL LEVEL IS FAVORABLE FOR A LOT OF THESE LARGER TRANSACTIONS. I WOULDN'T SAY THAT THE REGULATORY ENVIRONMENT IS PREDICTABLE. IT IS ACTUALLY UNPREDICTABLE, PARTICULARLY WHEN YOU HAVE STATES THAT ARE VERY ACTIVE AND YOU LOOK AT MOST DEALS HAVE SOME GLOBAL COMPONENT TO IT. THE GLOBAL REGULATORY ENVIRONMENT IS A BIT UNPREDICTABLE. DANI: ON THE GLOBAL M&A ENVIRONMENT, THIS IS SOMETHING YOU MENTIONED IN YOUR WORK, IT IS VERY MUCH THAT U.S. FIRMS ARE LOOKING OUT TO INTERNATIONAL DEALS. TO WHAT DEGREE IS THE U.S. BUYING THINGS ABROAD VERSUS OTHER COMPANIES ABROAD COMING INTO THE U.S. AND LOOKING FOR DEALS? KIMBERLY: WE ARE SEEING BOTH. THERE IS MORE INBOUND ACTIVITY THAN OUTBOUND ACTIVITY. BUT U.S. PLAYERS ARE DEFINITELY GOING ABROAD RIGHT NOW AND ARE DOING IT AT SCALE. IF YOU LOOK AT THE DEAL VALUES OF OUTBOUND DEALS, IT IS MUCH LARGER THAN IT HAS BEEN HISTORICALLY. BUT THE DEAL COUNT IS LOW. WHAT THAT TELLS US IS THEY ARE TAKING THE OPPORTUNITY TO MAKE STRATEGIC BETS THAT FULFILL THEIR THESIS. DANI: WHAT ABOUT THIS MARKET VOLATILITY? WHAT DOES THAT DO TO DEALMAKING WHEN YOU CAN HAVE HUGE SWINGS IN STOCKS AND SEE ENTIRE SECTORS SELL OFF INTO A BEAR MARKET AND RAPIDLY BOUNCE BACK? FOR PUBLIC COMPANY M&A, HOW DOES THAT CHANGE THE GAME? KIMBERLY: I SPENT A LOT OF TIME IN BOARDROOMS AND IT IS THE CONVERSATION WE ARE HAVING CONSTANTLY. VOLATILITY FAVORS THE PREPARED, THOUGH. FOR BOARDS THINKING ABOUT DEALS ALL THE TIME WHO HAVE A CLEAR THESIS AND THEIR FINANCING RELATIONSHIPS LINED UP AND THE TARGET LIST READY, THOSE ARE THE ONES WHO CAN MOVE VERY QUICKLY IN A VERY UNSETTLED MARKET. BOARDS ARE NOT SAYING SHOULD WE DO THIS $10 BILLION DEAL. IT IS HOW DO WE DO THIS $10 BILLION DEAL, IN A MARKET THAT CHANGES EVERY THREE DAYS, THREE MONTHS. DANI: SO IT HAS BEEN BUSY THUS FAR. HOW BUSY ARE YOU GOING TO BE FOR THE REST OF THE YEAR? KIMBERLY: THE PIPELINE IS VERY BUSY. I THINK THIS IS NOT A BLIP. WE ARE GOING TO SEE SUSTAINED A DEAL ACTIVITY. THIS MARKET IS VERY DIFFERENT THAN THE ROBUST M&A MARKET WE SAW A FEW YEARS BACK. THIS ONE IS SUSTAINABLE BECAUSE ALL OF THE PLAYERS ARE BEING VERY DISCIPLINED. I THINK WHAT WE SAW IN 2020 AND 2021 WAS UNDISCIPLINED. WE ARE SEEING PEOPLE TAKE MUCH LONGER INTELLIGENCE BUT IN AN ACCELERATED WAY TO MOVE QUICKLY IN THE MARKET. DANI: IT'S BEEN SO INTERESTING. KIMBERLY: LOVELY TO SEE YOU. DANI: KIMBERLY PETILLO-DÉCOSSARD OF WHITE & CASE. SHAKE SHACK STILL SEARCHING THIS MORNING, UP 12% AFTER THE STARBOARD CEO JEFF SMITH TOLD ME HE HAS TAKEN A POSITION. WE WILL TALK MORE ABOUT ACTIVISM. THIS IS "BLOOMBERG DEALS." DANI: THIS IS "BLOOMBERG DEALS." DANI BURGER, WITH SCARLET FU. THE DGB INVESTMENTS FOUNDER HAS BUILT A STAKE IN ETHAN ALLEN, WHICH HAS SEEN SHARES FELL ABOUT 7% YEAR-TO-DATE. HE IS PUSHING TO REPLACE THE ENTIRE BOARD OF DIRECTORS BY NOMINATING HIMSELF AND FORMER EXECUTIVES AT EBAY, WAYFAIR, AND NEIMAN MARCUS. JOINING US IS THE FOUNDER OF DGB INVESTMENTS. THANK YOU FOR JOINING ME. >> THANK YOU FOR HAVING ME. DANI: I WAS LOOKING AT YOUR OPEN LETTER TO SHAREHOLDERS AND YOU WERE CALLING ETHAN ALLEN A MELTING ICE CUBE. BUT THEY REPORTED A LARGE CASH PILE, POSITIVE NET INCOME. WHAT IS IT ABOUT THIS COMPANY WHEN YOU LOOK AT IT THAT YOU SAY THIS COULD BE ON THE VERGE OF DISAPPEARING? >> IT SOUNDS LIKE A TOBACCO COMPANY, REALLY, WITH A LARGE DIVIDEND AND DECLINING SALES. EVENTUALLY YOU CANNOT ALLOW SALES TO DECLINE EVERY YEAR FOR 20 YEARS BECAUSE YOU WILL EAT INTO YOUR FIXED COSTS AND GET NEGATIVE OPERATING LEVERAGE. THE BUSINESS IS FUNDAMENTALLY VERY STRONG AND THE PRODUCTS ARE GREAT. THE DOMESTIC MANUFACTURING IS A HUGE ADVANTAGE FOR THE BUSINESS IN A TARIFF WORLD. BUT THERE HAS BEEN NO ATTENTION PAID TO SALES AND MARKETING AND ESPECIALLY DIGITAL. ALTHOUGH THE COMPANY HAS CONTINUED FOR EVERY YEAR THAT I'VE BEEN FOLLOWING IT TO PAY LIP SERVICE TO THE FACT THAT THEY WILL BE DOING IT, NOTHING HAPPENS. SALES KEEP COMING DOWN. DANI: I KNOW THE WHOLE PITCHES WE ARE MORE INTERIOR DECORATORS, THAT IS OUR MODEL, WE WILL GO OUT, NOT THE SAME FANCY SHOWROOM YOU WILL SEE IN AN RH. WHAT DO YOU SAY TO THAT ARGUMENT, THAT THIS IS THEIR DNA AND HOW THEY OPERATE SO THAT TO PUSH E-COMMERCE OR THAN THEY ARE CHANGES THE DNA OF ETHAN ALLEN? DOUGLAS: A DIGITAL FOOTPRINT IS NOT AN OPTION THEY DISCLOSE IN THEIR 10K THAT THEY FEW THE INTERNET AS A THREAT, WHICH IS HILARIOUS. THAT IS SOMETHING OUT OF 2002, NOT 2026. IT IS NOT JUST BUYING GOOGLE AD WORDS. YOU HAVE TO HAVE A DIGITAL PRESENCE WITH EACH CONSUMER THAT I THINK ABOUT YOU WHEN THEY ARE ABOUT TO BUY SOMETHING, WHERE YOU ARE ENGAGED WITH THEM ON A CONTINUOUS BASIS. THEY HAVE MISSED THE BOAT COMPLETELY ON THAT. DANI: YOU AREN'T ASKING FOR TWO OR THREE BOARD SEATS TO COLLABORATE. YOU ARE GOING TO NUCLEAR OPTION, GET A WHOLE NEW BOARD IN. WHY GO THAT ROUTE? DOUGLAS: LISTEN, WE HAVE HAD SOME DISCUSSIONS WITH THE COMPANY. VERY CLEAR THEY WERE DISMISSIVE. THE LAST THING I WANT TO DO IS TRANSFER MYSELF FROM A FRUSTRATED SHAREHOLDER INTO A FRUSTRATED SINGLE DIRECTOR ON THE BOARD. FAROUK DESERVES A LOT OF CREDIT FOR THE COMPANY HAS BEEN RUNNING FOR 38 YEARS, BUT HE IS 82 YEARS OLD. THE BOARD'S AVERAGE AGE IS IN THEIR 70'S. THEY NEED A FRESH, CLEAN START. IF YOU LOOK AT MY DIRECTOR NOMINEES, IT IS AN AMAZING GROUP. ANY ONE OF THESE PEOPLE WOULD BE LOVED AT THAT COMPANY'S BOARD. YES, WE ARE ASKING FOR A CLEAN SLATE. DANI: JUST TO BE CLEAR, DOES THAT INCLUDE A NEW CEO? DOUGLAS: YEAH, WE ARE GOING TO HAVE TO RUN A SEARCH. MAYBE WE WILL RUN IT EARLIER THAN LATER. EVEN THE PRESENT WE ARE GETTING WITH THE PROXY CAMPAIGN--PRESS WE ARE GETTING WITH THE PROXY CAMPAIGN WILL ALLOW US TO GO OUT AND FIND A VERY COMPELLING CEO THAT COULD TRANSFORM THIS BUSINESS. WITH THE MENTORSHIP OF SOME OF THE BIGGEST RETAIL NAMES OUT THERE. DANI: YOU DESCRIBE THE PUSHBACK THAT YOU ARE GETTING FROM THAT COMPANY. HOW DO YOU THINK THE WIDER SHAREHOLDER BASE WILL FEEL ABOUT THIS/ DOUGLAS: I THINK THEY ARE SPEAKING TODAY ALREADY WITH THEIR SHARE PURCHASES. THEY ARE FRUSTRATED. LISTEN, THEY PAY A DIVIDEND, THAT'S GOOD. WE ARE NOT CHALLENGING THAT. BUT THERE WAS WASTEFUL SPENDING IN THE COMPANY. THEY OWN A HOTEL. WHAT IS A FURNITURE COMPANY DOING OWNING A HOTEL? YOU ARE PROBABLY DOING A BUNCH OF OTHER SILLY THINGS. WE WANT TO REALLOCATE CAPITAL FROM THE BUSINESS OPERATIONS TO A MUCH FRESHER DIGITAL MARKETING FRONT OFFICE PRESENCE. AND THAT MAY INCLUDE REFRESHING A LOT OF THE STORES, ETC. DANI: TO WHAT DEGREE IS THIS AN INDUSTRY THAT IS JUST CHALLENGE? ETHAN ALLEN HAS POINTED TO MACRO HEADWINDS -- A SLOWER HOUSING MARKET, HIGHER INTEREST RATES. IS THAT SOMETHING THAT REGARDLESS OF WHAT YOU CHANGE -- DOUGLAS: IF YOU READ THE LETTER, IN 2006 ETHAN ALLEN WAS DOING BILLING DOLLARS A YEAR IN SALES. RESTORATION HARDWARE, RH, DOING $700 MILLION. WILLIAMS-SONOMA WAS DOING $1.5 BILLION. 20 YEARS LATER, WILLIAMS-SONOMA IS DOING $8 BILLION, RH, DOING $3 BILLION AND ETHAN ALLEN AS SHRUNK TO UNDER $600 MILLION. THERE IS NO ARGUMENT THAT THE INDUSTRY IS A STALE. YES, THE INDUSTRY DOES DO BETTER IN BETTER HOUSING MARKETS. BUT FAROUK HAS MANAGED TO LOSE MARKET SHARE IN GOOD HOUSING MARKETS AND BAD HOUSING MARKETS. DANI: TO YOUR POINT, SHARES ARE BOUNCING AFTER YOU ANNOUNCED YOUR STEAK, SO GETTING A WARM RECEPTION. DOUGLAS BERGERON, FOUNDER OF DGB INVESTMENTS. ETHAN ALLEN BOUNCED, SO DID SHAKE SHACK AFTER THE ANNOUNCEMENT FROM JEFF SMITH. STAY UP TO SPEED AND SUBSCRIBE TO THE "BLOOMBERG DEALS" NEWSLETTER. THIS IS BLOOMBERG.