Structuring Deals and Investing in Sports and Entertainment

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Annie: Hello, everyone. Welcome to today's webinar, "Structuring Deals and Investing in Sports and Entertainment." My name is Annie Triboletti. I will be your host for today.

So we're really lucky to have an incredible lineup of speakers joining us today. You'll be hearing from Laura Uberoi, Stephen Birkwood, Helen Sarah Chipp, and Emeric Hudault. And guiding us through this session, as our moderator, is Sven Haase. So without further ado, I will hand things over to Sven to get us started and to introduce our speakers.

Sven: Thank you very much, Annie. Appreciate it. And thank you very much to my panelists for being available and for sharing some of the insight, experience, and expertise that they own on transactions that they've been working on.

I'm a commercial director at CSC. I've been with the firm for a year or so. In the last 10 years, I've been on the agency and trust side and the last 4 or so years on the corporate services side, so at CSC, where we work on the setup and administration of SPVs as they will or may be required in such of the structures that we discuss today, but also various agency functions and also trustee roles that we can perform.

So quite excited to ask Laura to introduce herself, and then we go along the slides. Please, Laura.

Laura: Super. Thanks so much, Sven. Lovely to see everybody albeit virtually. I promise I have limbs and a torso outside of this box. My name is Laura Uberoi. I am the Head of Private Wealth Finance at the law firm Addleshaw Goddard. And that means that I am, by background, a banking lawyer. But the reality is I look after all our family of first high-net-worth and private bank clients. So I see a lot of I think what people would call the weird and wonderful, and I've worked a lot in the sports and entertainment sector. So delighted to be here today.

Sven: Stephen, please.

Stephen: Thank you, Sven. So just to add, Sven and I, we worked together in the past. But a bit like the thespians in "Blackadder the Third," we refer to "Macbeth" as the Scottish play, and we'll refrain from mentioning that company name. Although, I don't know if you recall, Sven, we were at Deutsche Bank, if you dial the clock back about 20 odd years.

My name is Stephen Birkwood. Good to be here. And I'm a partner at Lonmile. I focus on capital markets, and I've been working in structured finance for about 30 years, starting back in 1995. It seems like a very long time ago. So a long while.

As I said, we're a multi-plan family office. We have activities spanning the globe, offices in London, Madrid, and Dubai. And we provide three different types of services, so fiduciary, direct investments, and capital markets expertise. Obviously, today we're talking about sports and entertainment. We have clients that operate in this space, in this sector. So we look at it from both a structuring and investment perspective, as well as kind of assisting those clients that are actively engaged there. So very different type of points.

Sven: Helen, please.

Helen: Thank you, Stephen. Yeah, I'm Helen Sarah Chipp. I am a director of media and entertainment for private clients at Union Bancaire Privée. I've been with them for about a year or so, but I've been looking after clients in the sector for the last 17 years. Previously based offshore in Monaco and Switzerland for 10 years of my career, and then I've been in London based for the last 7. And as Laura and Stephen sort of said, I've been dealing with the weird and wonderful of the entertainment world probably for the last 17 years. And then previous to that, I actually sort of grew up in the industry. So my whole family come from the music industry. So I have a fair few stories.

Sven: Emeric.

Emeric: Thank you, Laura. Hi, everyone. My name is Emeric Hudault. I am a banker at Macquarie, covering the sports and the entertainment sector. I started my career a while back as a banker in leveraged finance, and then I moved to look after basically the galaxy of sports assets for an investment company, a foreign investment company, including Premier League football clubs and a number of eSports assets globally. And so after that, moved back into banking to cover the sector at Macquarie, we tend to land into the sector, so professionals, leagues, and clubs, music royalty, films, TV, all of that. And so we're pretty active in that sector and have been for about 13 years.

Sven: Thank you very much, Emeric. You'll see that among the panelists, there's a fair share of experience, expertise that we'll be kind of excited to hear from. As we kind of set the scene with sports and entertainment, I would like to ask the panelists to kind of just set the scene, introduce us to the topic, to the asset class, what do we understand about it, maybe give some examples of transactions that they've worked on so we can kind of agree on the topic they will talk about. So Emeric, if we may start with you, please.

Emeric: It's a vast topic to talk about sports and entertainment in one sentence. But for us, it basically means, as I said, leagues, clubs, royalty, music royalties, films, and TV financing. Much of what we tend to do in lending tends to be in the form of structured finance. We use pretty much pretty similar structures, irrespective of the underlying sector, I would say, or industry. However, obviously, we use different methodologies to assess the risk of the different underlying assets. You cannot look at a stadium, at a transfer, or at a music royalty, or local subsidy for a movie the same way.

What we try and do as well, specifically in this sector, is to remove the operating risk from the underlying assets from the transaction, which makes this type of lending very different from traditional corporate lending or leveraged finance that I have been doing before.

Sven: Thanks, Emeric. Maybe on to Laura from your side, from the legal side, really kind of give us some background.

Laura: Yeah. I always think sports and entertainment is where the fun stuff happens, but I appreciate that's a low bar mark coming from a lawyer anyway. But I guess in my world, sports and entertainment are the operating businesses in which people either participate or they watch. And as I get older, I watch more and participate less. And so looking at that from the context of the clients I have, private banks, family offices, it's financing these businesses. And historically, that would have been financing European football clubs and looking at music clients.

But now, the world is disrupted such that you are looking at a variety of global sports and entertainment more so actually in emerging markets. And that's primarily because your owners or your potential owners and funders, who are coming in, are just a lot more savvy, and the businesses, the operating businesses behind these sports and this entertainment is becoming more and more commercialized and monetized.

So day job, lawyer, but actually a large part of my role now is actually bringing clients together who want to buy, who want to sell, who need to finance the assets. And the plays in that market, and we'll come on to it later, are changing dramatically, and that is influenced by global events, big capital movements, and some really, really interesting geopolitical stuff going on.

Sven: Thank you, Laura. Stephen, you mentioned you've worked on some deals in the industry. You mentioned football, etc. Maybe help us get an introduction to the topic, please.

Stephen: Sure, absolutely. Thanks, Sven. I just want to say, look, it's a pleasure to be part of this panel with Emeric, Laura, and Helen. They've got so much experience in this space. So anyone listening, you should feel privileged. I probably have the least amount of experience, although I have worked on a few transactions.

So look, what's there not to like about the entertainment industry? Sports, music, films, TV, these are four things that we all love to watch or be part of, as Laura said. So Lonmile, we have and I have in my past some exposure, some capacity to European and LATAM football clubs, music royalty deals, and also on TV. In fact, I received an opportunity in the film space a couple weeks ago, and . . .

Sven: On which side of the camera?

Stephen: Very good. Thank you for that, Sven. I'll pay you later.

Yeah, so this is a LATAM-based film production company. And if you're part of a family office, this is something you need to take a serious look at. We're not constrained by tracking the MSCI World benchmark. This sector is true private markets, which is why it's so interesting. At the same token, it's tough not to get very excited and emotional about being in this space because there are many great film producers out there and platforms, but also many of these films will never see the light of day. So when looking at it from an investment perspective, you really need to think with a clear head.

So like many investors in this space and also the private credit funds are obviously very active here, we like structured debt, maybe with some equity thrown in, if that's possible, in the form of warrants. Very much the challenge that we find is sourcing the equity investor because in this sector specifically duration is often quite long and the payback can be quite uncertain. Now unless you're talking about premiership, which Emeric has a lot of experience in, or Wrexham United with Ryan Reynolds, where the probability is obviously much higher that you're actually going to achieve something, you've really got to do some careful due diligence.

So Emeric pointed on this as well. How we analyze and assess the merits of say music royalties or a football club trade are very different. But the cash flow, from our perspective, investors' perspective, our clients are looking at this perspective, cash flow is king.

So if I give an example, if you think about Tottenham, which is what every black cab driver supports, it's either that or West Ham, if it’s a cab, that’s what we have to speak about. The Spurs make a lot of money monetizing their stadium. So they don't just use it for football games. They use it for music concerts, NFL American football. And they were very smart to create this kind of amphitheater type experience. And in the past, people would go to the pub to eat and drink and so forth. Now they go to the Stand. So the Spurs have been very clever and taken advantage of that fact. So now it's more of an experience going to football match than just going to watch your team play. And I think probably the best outlet in terms of monetizing it.

Having said that, if you look at the stadium, as a lender, if the football club defaults, are you going to go and convert that stadium into a block of flats? It's highly unlikely, you’re going to get lynched. There was one example recently, that I was trying to find it online, where Brentford FC managed to convert Griffin Park into 149 homes, and they're selling that to key workers in the club and local residents. Now that's a different situation. That's essentially where Brentford have moved the ground, but the club has defaulted.

So I think here the point is that if you're looking at the stadium, you're never going to be able to realize the true asset value of it because you can't sell that stadium. So the important points would be, looking at a lender's perspective, is what sort of cash would be generated.

Football is a really difficult one because the other example is, obviously, Jim Ratcliffe, who has taken on Man United. He was able to deal with angry unions as the head of INEOS. But his stand at Man United is a different kettle of fish. And if the supporters aren't on side, you've got serious problems at both the business and personal level. That's where a childhood dream can turn into a nightmare.

But just in summary, kind of at a structuring level, if we're looking at football clubs, we're looking at music, we're looking at film, we'll try and securitize those assets. We want to create access to those cash flows. We care about the underlying assets of the business and thereby sort of avoiding the noise at the company level. And specifically, how we structure that would be either as a credit note or as an actively managed certificate asset merger process. And yeah, I think that's a good stop.

Sven: Thank you, Stephen. I know you touched specifically on the sports side, even though you mentioned in there, towards the end, the music business, the music royalties.

Stephen: Yeah.

Sven: So maybe going to Helen, also giving me your or Helen's experience or kind of background on the music side. Maybe, especially on the music side, get your intro to the subject. And then, afterwards, we'll have a look at some of the challenges. But look, let's go with Helen first on the music side, please.

Helen: Yeah. So look, as you mentioned, I've been sort of following the music side for a long time now and dealing with the sort of private investors in the space. As sort of Stephen intimated, a lot of them are passionate. So giving them the opportunity to own what we call like a slice of history, if you think of your favorite rock bands or the musician that you've followed for decades, if we as an investor gave you the opportunity to invest in a government bond or a slice of rock 'n roll history, I know what sounds more appealing to me. But it's nothing new, pension funds have been investing in the space and music catalogs for decades. They're very stable cash flows, especially if you have what we call evergreen catalogs, so artists that you could hear for the first time today and go back and listen to four, five, six, seven decades of music from.

But PE has recently gotten into the space. I mean, it's always been an interesting asset class to look at. But when we had interest rates fall to near zero and music catalogs still churning out very solid cash flow returns, suddenly private equity thought it was quite interesting. So you had a lot of companies put big checks into the space, buying up catalogs.

I think there was sort of a pivot a few years back, when interest rates then started to rise again, and perhaps the asset class that they bought into, they weren't necessarily familiar with how to get the excess returns, so what we would call sort of sweating the catalog, getting syncs and getting placements for music again so that the actual asset in itself grows in value. We're actually seeing private equity houses now join forces with publishing houses, which is quite interesting because then you've got both sides of the model. You've got the publisher there, available to actually really extract value from these songs that may not have had recent syncs or recent plays in years. And then you've also got the capital from the private equity side investing in these really stable cash flows.

But yeah, I mean, we're also seeing big crossovers. As Stephen mentioned, it's the story of Wrexham, having actors and musicians really wanting to get passionately involved in the sporting world. And I think we're seeing a lot of U.S. personalities look at the Premier League as something that's rife for opportunity because in the States, as Stephen mentioned, Tottenham do it very well here, but actually by and large, we don't do a lot of real commercialization of our sporting brands. And the Americans look at it as leaving quite a lot of meat on the table. And so they look at us and think, "Oh, we could turn the whole stadium into an experiential thing that people might want to go and do tours of all year round and be part of it and not just 12 or 18 matches a year and that's it."

So I think there's quite a long way for us to go on the sporting side. But there's definitely a huge amount of interest there, normally passionate.

Sven: Thank you, Helen. And I think I know where I would invest if I'm presented with a government bond or with my favorite band, even though I'm not going to disclose which one. And you touched on the kind of interest from private equity into that field, starting on the royalty side, the music side. But maybe staying with you, Helen, where do you see the biggest opportunity in that field? Kind of what other big trends are shaping and what are the key things to look out for in that field?

Helen: Yeah. So I briefly mentioned sort of the States looking at the UK sporting leagues and seeing that there's definitely a big commercialization opportunity to do. But I know often people just look at the Premier League because it's our biggest, it's our brightest, it's our most well-known. But actually, there's so much more value to be had if you look at some of the lower league teams, whereby you as an investor can make a real impact. If you can take a team from a championship up to the premiership, the additional value that that's going to add is immense. But you also get that support as well. So like you've with Brexit, all of those local supporters that have wanted for years to see their team facing the titans, you just bring the whole community with you and we've got this buy-in of real loyal fans, who don't look at the outside investor as corporate money coming in to just take their slice of the pie. It's someone really building something that's beneficial for everyone.

And so I think, looking past our premiership, although there are obviously opportunities there, I think League One, League Two, there's just more interesting things that can be done and a longer, more fulfilling journey you can go on with those assets.

Sven: Thanks, Helen. Laura, moving on to you, what have you seen? What are the key things to look out for? Where do you see opportunities or you and your clients?

Laura: Yeah. No, I mean, I completely echo what Helen says, and that's not just because we work ere quite closely together on a lot of these clients and deals. But there is for somebody who is willing to come in and commercialize a lot of these revenue streams, it doesn't have to be football clubs. It can be any sporting business, music business. If they're able to come in and do a bit of a turnaround job, then you are looking at very, very nice returns. I think we're seeing that the most with European clubs and other entities who are in lower leagues. Often families and private capital are coming in, in a little group, buying up a little collective of these entities, throwing in new management teams, a bit of fresh blood, and reaping the benefits of that.

I mean, in terms of trends of what I am really seeing at the moment as well, the most popular choice by an absolute mile for most of the families that I look after are women's sports. And I'm not just saying that because I am one. And so that's what I track and generally wholesale all the stats show that people are piling into women's sports. I mean, for example, that just leads to some really interesting stuff. So we are supporting what is going to be the first female into Formula 1, which is shocking because it's 2025 and women are built better for driving. But, I mean, not to be controversial. I mean, genuinely from an aerodynamic, bone density perspective objectively. But that is giving rise to just some really interesting movements in the market.

Sven: Thank you, Laura. I'm looking forward to the next Formula 1 movie, now that we've had the premiere with Brad Pitt. But Emeric, from a financing side, banking side, what have you worked on? Where are the kind of trends, or where are some of the key opportunities that you see in the transactions that you work on? If we've lost Emeric, let . . .

Stephen: Emeric, you're talking, but we can't hear you.

Emeric: Is that better?

Sven: It's much better, yes.

Emeric: Can you hear me? Yes, sorry. So in financing, there's quite a bit of demand from clients for new stadiums right now, as the value of the TV rights are tapering obviously. And so that's a big opportunity in terms of financing, particularly for kind of insurance like investors that can look at very long maturity at relatively low yields.

We see as well a bit of light restructuring on balance sheets for a number of clubs. That's driven by basically the increasingly stringent FSR, potentially related-party transactions as well that impact the treatment of [inaudible 00:23:38] and various technical bits.

In the music industry, we've seen a change in the business model of the big majors. That's created opportunities to basically provide capital directly to the kind of up-and-coming emerging artists, leveraging basically the availability or the access they get to the public through Spotify and providing them access to those royalties quite quickly so they can build their brand.

There are also opportunities to rebuild on what Helen was saying in terms of improving IR for catalog investors that have been cut by the increasing interest rates through a little bit of arbitraging and structuring around those deals.

On the equity side, like I will agree with everyone. There are two types of transactions. The ones that are very attractive financially, that's the new league, and sadly we still include women's sport in that. It shouldn't, but that's the way it is. Sport entertainment as well, like Kings Leagues, or new formats. SailGP currently is very fashionable and very reasonable.

The other aspect that can attract a number of investors is actually the non-financial return that you can get from investing in sports. Think about status amongst other things and access, and typically the traditional leagues and the bigger assets provide that.

Sven: Thanks, Emeric. Stephen, on the deals that you've worked on and your clients, where do you see potential? What are the opportunities, especially some that haven't been mentioned by the other panelists?

Stephen: Yeah, okay. Sounds good, Sven. So yeah, to confirm what Laura, Helen, and Emeric have said, I think esports and women's football, clearly that's going to grow exponentially. Looking forward, that's an area that we're taking a look at.

But specifically, for us, it's more football across the Middle East and Africa. That's quite an interesting area that we're looking at. And as I mentioned before, TV production companies, primarily in LATAM and India and Asia are another area that we're focusing on.

Sven: All right. Thanks, Stephen. The panelists kind of seem to be quite excited about opportunities in various fields, and we talk about exponential growth. At the same time, there are probably some obstacles, some challenges that we see, either as we kind of put these two fields together or over the lifetime. So Stephen, maybe starting with you, where do you see the biggest not necessarily obstacle, but what particular aspects make this more complex or difficult to structure?

Stephen: Yeah. So I kind of mentioned this before. So I think the timing is often the biggest challenge because the typical lock-ins and the lack of visibility on the exit can be quite a challenge because, as I said, unless you're talking about premiership football clubs or extremely well-known brands, whether it's music or film, the lock-in period is going to be years. You're always going to be able to get some sort of subsector, whether it's documentaries or anything else for that matter. So these sectors, sports and entertainment are very idiosyncratic. And every transaction that we look at is very bespoke. So whilst that's also very interesting, it does create some challenges.

Also, by definition, because lock-ins are very long, liquidity is basically non-existent. So you've got to be comfortable with that, who you're partnering up with, the opportunity to have a very decent working relationship because you can spend a number of years. They need to have a track record. And it's important that you partner with the right firms when you're putting this together. So that means law firms, like the one that Laura works for, and corporate service firms, etc., etc. So that the whole due diligence process, when you're looking at it from an investment perspective, is tier one is nothing.

Sven: Thanks, Stephen.

Helen: Yeah, Stephen, I couldn't agree more. When you just said getting that team together, I was . . . Sorry to jump in. But on the music deal side of things, it's exactly that. The amount of deals that haven't managed to cross the line because we had to scramble to get the right team together too late in the day. And I can see Laura shaking her head. Due diligence, especially when it comes to something like, as I said, our rock 'n roll legends, who wrote their music in the '60s, '70s, '80s, weren't the best at documenting things.

Ownership structures are interesting. Deals are done on the back of napkins. There are all sorts of weird and wonderful caveats to do. So I would say get your lovely, friendly lawyer in touch with ASAP at the start of the deal. Get them to help bring everything together so you know what it is that you're selling.

And then, especially on the music side, the other big challenge that we face is getting everyone to agree. So not everyone wants to sell. And when you have a band that's got multiple members, sometimes they haven't talked to each other for a while, it's quite difficult to get them in the same room and agree a path forward.

But yeah, I think it's that team. Get that team and that due diligence pact done ASAP so that you're ready to go to market and ready to give access to the data for those that need it. I'll hand over to Laura because I can see she's agreeing.

Laura: Oh, no, I'm nodding away because it's actually a really small world. But having the right early-days team together is so right. And there's a reason why Stephen, Helen, Emeric, and myself know each other really well. It's because we spend a lot of time in this and looking at it from all sides of where we sit. And I think actually that due diligence piece isn't so much I shouldn't say the boring law stuff, but more as a from people who see these deals all day every day what is the sniff test, what does it actually look and feel like, what we've seen others do with this that has or hasn't worked well.

And actually, the vast majority of my time is spent counseling people on understanding their local market. We have just been through a piece where I feel like we've come out the other side now, where we alluded to it earlier, we've had to explain to our U.S. investors coming in it doesn't matter how much money you throw at it, the fans of a football club in the UK will basically vilify you if you don't give up your firstborn child. So don't expect a blaze of glory when you first land. And that is true of whatever market it is. And you've got to have people on the ground to give you that intel.

And so it sounds, from everything we're saying, but unless you know everything and you're all properly cleared up, then you shouldn't get involved. But actually, the opposite is true, and it is increasingly an accessible market for new entrants. And I think that's because the world has opened up such and the world of private capital is such now that families and experienced people are twinning up together to go into these new ventures.

And so actually I spend quite a lot of my time with clients coming to me saying, "I want a football club." Or, "I want a yacht," or a helicopter or something else. But let's say they say, "I want a new entertainment fund." And I'll say, "Great. What funds have you done before?" And then we sit quiet for a bit. And then I say, "Excellent. Well, rather than me just setting you up a new entertainment fund now to buying these rights, or rather than just buy me this football club and you've never owned any other before, what I'm going to do is introduce you to a couple of families that I already look after who do this. You can go in together, watch and learn. And when you've been through a market default, then I'll help you go off on your own because that's truly the only way to do well."

And so I think, generally, as with everything, there are obstacles and challenges. And it's about gaining knowledge and access to the market you want to be in. The easiest way to do that is the people who are already in it.

Sven: Thank you, Laura. We talked about sniff test earlier. Emeric, you must be presented with quite a few opportunities that you and your teams then kind of have to look through to assess the potential. Where do you see the obstacles, or what are the kind of key things that you look out for in order to kind of sift through the opportunities that you have on the desk?

Emeric: Well, there's technical issues where you read things and you know that it's just not going to work because from time to time it's just jurisdiction, from time to time just it doesn't stack up. The hardest bit is to . . . It ultimately comes down to putting the right team together, but putting the right buyer, the right seller, the right finance team together.

There's a lot of people that have interest in either buying or selling. But actually the number of transactions that get done is very small, and the reason for that is Laura was mentioning that the owner would have to give up his firstborn child to try and win in the funds. The reality is quite often that firstborn child is replaced by that entertainment or sports asset, and suddenly the owners, whatever happened, unless there's an absolute necessity, no longer want to sell because they love it so much. And so whatever the price, the deal never happens.

There's also a lot of investors that love the sector, and so then you realize that to actually be meaningful they will have to invest a large share of their wealth into the sector and there aren't certainties around the returns. There aren't certainties around the investment horizons. And suddenly, when they need to press the button, well, they're not that confident anymore that they can do it.

And when it comes to institutional capital, a big difficulty is the scale or lack thereof. A lot of the deals are relatively small. A lot of the deals are basically difficult to originate. And so that limits the liquidity in the market. It's not always economical for many investors or investment firms to create a team that is going to be able to run after thousands, or maybe not thousands, but hundreds of small deals day in and day out to actually put together a pool of assets and a pool of financing or investment opportunities that is relatively small in size versus now the size of AUM you have in most asset managers. And that's why you see there's a bit of a dichotomy between an ultra-high-net-worth/private banking billionaire's market that is very interested in the asset class versus the more institutional liquidity that is curious about it, I would say, but not overly active.

And if you push it one step forward, when it comes to the public market, the public financial market, there's actually very little happening in sports there. And that reflects currently what is the biggest challenge is the ability to size the stake up so that it becomes attractive to everyone.

Sven: Thank you, Emeric. And we touched on the word "team" a couple of times, so the whole kind of universe of people that will be involved in working with these transactions. We talk about emotions. Either it's on the sponsor side or the investor side, who have that dream to own a piece of music or that sports club, etc. So either the emotion is on the investor side or on the fan base, etc. But at the same time, and I mentioned you've got a whole universe of people, partners working in these transactions. And given all the various complexities, whether it's cross-border, whether it's a new asset class or an emerging asset class, new investors coming in, you have agents, you have entities that need to be set up and then administered over the lifetime. You've got agents who do the communication and the liaison between the borrowers and the lenders. You've got trustees if there are certain secured interests that need to be looked after.

So Stephen, from your side, from working with that kind of whole universe of agents, etc., what do you look out for? What are the key things to consider when working, and what kind of makes or helps you then bring the deal to the other side and make it a success?

Stephen: Yeah. Thanks, Sven. Yeah, I mean, look, who you're dealing with, as mentioned, is critical. You need to deal with tier one firms. That doesn't necessarily mean the biggest firms, but professional outfits to limit your risk. That's what it's all about here with everyone that's obviously on this call today who's working for a prestigious institutional outfit, and therefore, these things need to work properly.

I've worked with some firms in the past, and we've had situations where we're using a service provider, whether it's on the agency side or something else, and they said that they can provide that service, and then they've reneged after the terms are signed. That's occurred. We've had situations where we've agreed costs upfront, and then at the end of the process, the costs have doubled, implying that the investment is therefore not as attractive as it was before.

So you need to be dealing with respectable, strong counterparties where you've got experience. So you want to target, obviously, providing a seamless experience for your client. Now, realistically, let's be frank. When you're working on a transaction, there are always going to be issues. You're dealing in structured finance. You've got about 400 different things going on, and you're dealing with potentially 5, 10, or 20 different counterparties doing different things, from loan agency to paying agents to escrow to SPV provider, etc. etc.

But I think part of the problem is, and this isn't a Lonmile problem, but maybe other parties, they're a bit obsessed with saving one or two basis points here or there, and procurement departments at certain firms are as well, and less focused on mitigating risk, which is the key here because it's all about if things don't work smoothly for you as a firm.

If you take any UK government infrastructure project, they're always a complete disaster, and it's because they hire the cheapest and worst contractors out there. Then they spend millions hiring the Big Four, their place is to then come in and tell them what went wrong because they hired the cheapest and worst contractors. And it's the same every time. All these projects are a disaster. And that's where they're focusing on costs as opposed to service and quality of the counterparties.

So key points, I've worked at U.S. banks in the past. So it's always three points or five points. I think I've got five for this one. I would look at reputational issues. So firstly, that's like the best service providers. Definitely I would look at the time it takes, i.e., to execute. How flexible and innovative that that party is. Let's be frank, things are going to change with the time. You can't just go into something and then you, as the client, decide that something doesn't fit and change the process. But how willing and flexible is that service provider to kind of work with you and create that bespoke solution?

Costs, but more from the perspective of what was indicated and what was paid. What's that variability from start to finish? And you think things can be changed as well at the time. But the certainty around that is key because it has a direct impact on the investment and the IRR for the inclined giving.

How often are the goalposts changing during the implementation phase? Structuring is complex. How much flex, as I mentioned, has the service provider built in?

And then, lastly, technology. So AI, interesting platforms, if they work, they can be an absolute game changer because they're quick, they're efficient with everything we use. But you don't want to be the guinea pig. You don't want to be that first client that is testing if that technology works. So it's quite important that you're kind of confident that it has been robustly tested within the organization that's promoting it to you and that you're the first person trying it right now.

They're the key points I think, Sven.

Sven: Thank you, Stephen. Emeric, you've obviously worked in some of these financing also with external agents, various counterparts, etc. Anything to add from your side? And then, I think maybe also Helen, maybe you have to share some spec from your side. Let's kick off with Emeric, please.

Emeric: Yes. I think there is a passion at some point in investing in sports and music and entertainment and all of that. And it's important to find, to work with someone, to have a provider that's not going to spoil the fun. At the beginning, at the time when the transaction is set up, but also in the after years, when you're looking after your portfolio, having someone you can interact with and you trust and you work well together is very important. And so that goes back to the point of Stephen around the reputation and the quality of the providers.

When we look at things like the SPVs and trustees and agents, on the financing side now, there's clearly a part of the business that's become very flow by nature, and in those products now, the structuring has been simplified and lenders tend to face directly to the borrowers. We're thinking about media rights. We're thinking about transfer financing, sponsor financing in sports. That's quite often the case.

However, for riskier and other more adult transactions, if you think maybe stadiums that don't get done every day, or on movies, some musical catalogs, and so on and so forth, you clearly would want to isolate yourself from the wider business. And at that point, you would use slightly more structured solutions, including SPVs and various products. And the difficulty here is you need to work with someone you know is going to react quickly and well.

We're all culprit of something is that we think about our product, our solutions, and all of that. But when it comes to execution, we only press the button at the last minute, just because it's obvious to us that it's going to happen, but we forget that it still needs to happen. And so having great partners in that part is very important. To be fair, we've got enough on our plates. So if you can take that off the plate and be relying on a good partner, that's key for us.

Laura: Sorry to interrupt. But as a collective of everyone on this call, I think the reason why we all do an enormous amount of work together is that we shuffle a lot between us on the basis that we operate mainly on a quick yes or a quick no. And it is absolutely fine for your partners to give you a quick no so you can crack on and move on. And it doesn't mean that I still don't throw everything else weird and wonderful that comes in front of me to the others. And so when people are setting up originally, that is my number one piece of advice. Get your processes and procedures in place so that you can say yes or no. And if it is a yes, then make it happen quickly because you only need to mess that up once and you're not going to get anything else in the market again.

Sven: Thanks, Laura, for jumping in. Helen, from your side, I think you may have some points to add.

Helen: Yeah, of course. On the private client side, especially in the media and entertainment segment, we deal a lot with, as you mentioned, the agents, the trustees, and the use of SPVs for a number of different deals. So I think there's a couple things that come out of that, that are just really important to note.

One is the principal agent problem does exist. You will have people that are part of the transaction that benefit from one outcome versus another outcome. And so going back to our original conversation, having someone on the team that has the client's best interest at heart and only the client's interest at heart, not whether the deal gets done or not, is so important so that the client has that support through the whole journey. I think that's a really important point there.

In terms of the use of SPVs, if I look at music catalogs, there are different ways that you can sell and structure a catalog, and actually they do have material impacts in terms of tax and actually the multiples that you might be able to achieve. So a shout-out to any handy accountants out there. You're very helpful in terms of being able to structure those sort of tax implications and make sure that all parties understand that outcome one can happen with structure one, and outcome two happens on the other. And then it's down to the client to decide what works there.

And then I would just say if you can engage your team early, as we've talked about before, it makes everything more aligned. Getting the alignment from your trustee, who is going to be working under constrictions, getting your alignment with your tax, getting your alignment with the legal, getting your alignment with the financing, all of those things will make everything go a lot smoother.

And then sort of the final point on that is that not all capital is equal. So we often have clients that say, "Oh, yes, like I've got a price in mind," or, "I've got an X in mind," and that's all well and good. But it does make a difference whether that comes from venture capital, whether it comes from private equity, or if it comes with a debt line, or if it comes as a family office because they'll all want a different degree of involvement, and they'll all shape the business or the asset differently going forward. So it's really important to have really thought about that before. It's like what type of capital do you want coming into this deal?

Sven: Thank you. Thanks, Helen.