Okay. And we've got an hour. Okay. And on the menu is three ideas.

Okay, so we've got three ideas on the menu, which is bolt-ons, which is where you use an LBO portfolio company to build a platform.

Div recap, which is where-- ignore this stuff down here, you borrow midway through an LBO to release some, you could call it releasing of equity, so to pay some cash to the sponsors. And then we've got management incentives.

Now, when I ran it this morning, I wasn't able to do all three because they're pretty big ideas, and so rather than doing a super whistle-stop tour through all three, I covered two in a reasonably light level. Because, again, these are big ideas that usually take about half a day each to teach.

So I want to get an idea of if you've got any preference.

I think naturally, in terms of what people need to know first, I would be attracted to bolt-ons first because they're so common, div recap second because they've become more common as exits have become difficult, and then management incentives last because they're quite negotiable, and actually quite complicated as well.

But I'm happy to be guided on that. So if you have any strong opinions about that order.

Okay, if anybody says, "No, I absolutely came to this lecture to hear about management incentives and the ratchet.

I don't need to know about bolt-ons," then I'm all ears.

And enough people say that, we could change the order.

There's no fixed order, and from experience this morning, we're unlikely to be able to look at all three in detail.

And again, if I don't hear anything, I'll go bolt-ons first, div recap, and then if time, management incentives.

Good.

Okay. Wait for other opinions. Hermes straight in there, which I like very much, but if anybody has any other opinions or agrees, feel free to let me know.

I imagine nobody else can see Hermes' comment.

We've got an hour together, probably more like 40, 50 minutes now if we have a Q&A at the end. We've got three topics, of which we'll probably be able to do two in a reasonable depth, and then maybe just talk about the other.

Now, when I say reasonable depth, we're not going to build models on these because we've only got an hour.

Okay. Each one of these, if done in full, would probably take about half a day to do in depth.

If you wanted to look at them in depth, under Felix, investment banking, private equity, you'll be able to find bolt-ons, div recap, ratchet, and other incentives, and you could take your time.

Okay, so you could see this as an introduction or a chance to ask questions if you already know about it and you want to go a bit further.

Let's open up this additional complex LBO components, and let's open up the full one.

Okay, so we're going to open up the full one.

And if you don't know where to download that from, let me know. Okay.

You should all have access to those files.

Just getting to get those open. I'm going to open up Factset.

Okay, and then while Factset's firing up, which takes a little while. Right. Let's just talk through what bolt-ons are first.

Let's say we're a fund. We're placing ourselves into that role. Okay. We might be advising a fund, or we might actually be one of these companies. Our role can vary here.

The fund is going to get into a port co.

And let's say they buy into Hilton, and I'm using Hilton as my example, at 11.

And it's quite common in LBOs to exit at the same as you enter.

Okay, so let's say we're running a fund for Blackstone or TPG or something, and we're going to take Hilton private, which is what happened in, I can't remember, 2008 or something like that.

And then let's imagine that one of our central strategies is to create cost reductions in Hilton.

Okay. What we're effectively talking about is the base case.

So let's say we're running an LBO on Hilton, and ignore the timing. Okay.

Here's Hilton's LTM EBITDA.

We're going to buy in at 11 and exit at 11.

We're going to run Hilton, which is going to do well, and we're going to create some cost savings.

So that's us running the portfolio company.

And then we've got a typical LBO model there. We're going to exit in year 58, maybe five years after entry. That's the dream.

And we're going to exit at a really decent 26.1.

And I think that's with circularity on. Yeah.

Okay, so that's the basics. That is not a bolt-on situation.

That's just a basic LBO situation.

Now, to enhance the value, we can pursue a number of strategies.

Okay, the first is cost reduction.

We could try and expand that multiple on exit, but that's really hard to do.

Okay, what we could do instead is, let's say we're-Running the LBO and let's have a look, history. It's quite a good example, and I stumbled on it.

Zoom around.

Okay, so here's Hilton in Factset.

And if we concentrate on the transactions.

Okay, so it's just taking its time in case you're wondering what it's doing.

There we go.

Now you can see that if we agree that Hilton was in the real world, which is true, taken over by private equity around this time, you can see that beforehand, in terms of transactions, there wasn't really much going on at Hilton. You can see the list.

Until about 2007, you could fit that all on a third of this working area. And then can you see how accelerated it gets? You can see multiple transactions in every year, some run times upwards of 10. And that's what you're seeing here, lots of deals and high transaction value. And what's happening here is that under private equity stewardship, Hilton is effectively embarking on a buy and build strategy.

So it's folding other hotel chains that are smaller than itself as bolt-ons, add-ons, into itself and creating a larger whole.

And what that does is it creates a number of benefits.

Number one, those smaller targets come with the promise of improvement.

And actually, the smaller targets, because they're going to be folded into Hilton and not a fund, it's much more likely that you'll get proper synergies out of that interaction.

And that means that if we can keep bringing on bolt-ons for a while post-acquisition of Hilton, we can up the value, okay? And we can bring up our IRR.

This is called a bolt-on or add-on or sometimes platform strategy, although that's a bit more IT.

And you can see here's the base case, and then what we've got is an add-on, and then an add-on case.

And without looking too much in detail, can you see the base case has an IRR of 26.1, and then the add-on case has an IRR about 1.5% above that? And that's because we've created a bolt-on, which has been good. It's created value.

Okay. It's cost a little bit of money to buy that bolt-on, but it's meant a really good exit because you've brought in some really good effects there.

Right. So that's the context of a bolt-on without getting too lost in the numbers.

Any questions on how that works or why you'd want to do it, or who the players are? Okay. If you're still typing, keep typing.

Now, I'm lucky I get to play around with client bank models quite a lot, and the two types of bolt-on model that I tend to see are very detailed.

If you want a high level of accuracy or if the bolt-on is significantly sized compared to the portco.

Okay, so if the bolt-on is a honking great bolt-on, then you probably want a level of accuracy like this, where you say, "Okay, let's create a mini model just for the bolt-on.

Then let's fold the bolt-on into the LBO model." So just as an example, in the base case, can you see it just says sales, and that's the sales of Hilton, as an example.

Whereas in the add-on case, you can see Hilton's sales and then the bolt-on sales once the bolt-on comes online.

And you can see that we're going to buy the bolt-on in year two, which means we're going to run it from year three, and it's going to provide value to us, the fund, from year three onwards and contribute to the exit, okay, which is in year five.

So that's why you end up with this profile of right, we buy Hilton, run Hilton for a while, need some more cash, so we put some more debt and equity in.

Okay, run the new bigger group for a while, get those nice synergies going, and a really great exit to lift up the IRR.

Okay, so that's how the detailed one works.

The add-on case sort of way of doing things.

Now, in the next 10 minutes, what I'd like to do is build up a simpler way of doing bolt-ons, okay, which I see in lots of client models as well.

And let's do that in the base case and think to ourselves, well, how would this work? And in doing that, we'll get a better understanding of how bolt-ons work, too.Okay, let's jam in a bunch of space here.

And you can do this along with me, or you can watch me do it and shout at me when I make inevitable mistakes.

Let's imagine we're going to embark on a program of bolt-ons, and we're trying to see what the impact would be to the already pretty respectable IRR of 26%.

Let's imagine that we regard the spending on bolt-ons as CapEx.

And so let's say we get cracking pretty quickly, and we ramp up our bolt-on program, and then maybe wind it down because we're getting pretty close to exit.

You don't really want to buy a bolt-on in the year of exit because you won't have time to ramp up the cost savings or synergies in the bolt-on.

Okay. You might not also want to buy a bolt-on in year one because everything is still settling post-acquisition.

But let's imagine we're very agile here.

All right, so that would be an assumption.

Okay.

What we'd need to do is think, right, how is this stuff going to end up getting into our model? So CapEx is quite easy. We can just jam it in and say, right, we've already got one level of CapEx.

Let's put the bolt-on CapEx here as well, and let's point it straight at the bolt-on CapEx.

Okay, so that's a new line.

Now, you could see that has really done a number on the IRR.

It's gone down by about 3% or 4%, but that's because I've just pretended that I've spent money on nothing.

Now, if you spend money, it usually buys you something, right? Whereas now all I've done is just spend money.

So I've taken the negative consequences of the bolt-on, but not the positive.

Also, just keep in mind that the way I'm running things now is the simplified version. And what I'm doing is I'm actually starving my debt of money to the point where I have to actually borrow on the unsecured notes.

And I'm not sure how realistic that is.

Okay, but we'll leave the model as it is. This is a simplified version.

It might be that in the real world, we'd have to say that we can't afford that initial 100, and we have to hope that things ramp up by here, and we can afford it.

Okay. Now we've got to think about how we're going to get the bolt-ons into the income statement. And the kind of entry points which I see are either sales or maybe something like EBITDA.

Okay, so you can see that we've got the sales here, and we could just add the bolt-on sales to it and then let EBITDA margin sort out what becomes EBITDA.

Or we could say, no, let's go straight to EBITDA, and we could have Hilton's EBITDA here, and then maybe the bolt-on EBITDA down here.

Over here, we're going to add stuff up. So I actually quite like that approach.

Might be quite straightforward. It might come and bite me later, so I might regret it, but for the moment, let's go for it.

So we're going to say bolt-on EBITDA.

Now we've got to decide, right, if we buy 100 million small company, like a small regional hotel chain, how much EBITDA will come out of that? And what we can do is we can say, right, what about our bolt-on EV EBITDA? If we're buying into Hilton at 11, what do you reckon? Would our bolt-ons be higher, lower, the same as Hilton? Any suggestions? So buying into Hilton. Yeah, Hermes, well done.

So this is a local sort of regional chain, right? So it's quite likely that we can buy into this regional chain at lower than we would have bought into Hilton, which is a really recognized brand. So let's imagine that we go for a bolt-on EV EBITDA, and let's copy format.

Okay, and say we buy in at six times.

Okay.

That's an awful...

All right, so whenever we put in money, we end up getting EV EBITDA of six times.

And then what we could do is we could say, write the bolt-on EBITDA.

Okay. And now it's tricky because can you see we've got the theoretical EBITDA from each year? Okay. But if I copy this to the right, what I'll be failing to recognize is that those will grow.

So probably the simplest way I could do this is by having a different row.

For each year of bolt-on.Okay, so if I spend 300 then that year, and even that is a simplification because I'm acting as if I get the earnings in the year that I buy, I'll get 50 of income from that, and then I could slot that into the bolt-on EBITDA.

The problem is that would ignore, like I say, the idea that the bolt-on EBITDA will grow.

Okay.

And this is where it gets complicated, which is why we end up going to much more complicated ways of doing things in the complex version. But let's say in the first year of ownership, we're able to get really great growth because of, say, synergies, and then things settle down. Okay. Things settle down.

Things settle down. Whoops.

That's not settling down at all.

Okay.

And what's tricky about that now is that that is out of line with the rest of our model.

So can you see year? Okay, that's year one, that's year two, that's year three, and that's year four of ownership.

This one is going to grow at 10%, et cetera.

You see that? And then we have to do it again for this one because in my first year of ownership.

And I think in my view, this is where bolt-ons start getting really tricky because you end up with these weird diagonals and things.

And to make this smart and to flow really nicely and be more flexible is actually very challenging from a modeling point of view.

Okay.

Going to just flat lines, right? I don't know why.

Let's just keep things simple, and let's say that after that, EBITDA just goes nowhere. In reality, it would go up by inflation or something, wouldn't it? Okay, so then total EBITDA.

We can say, right, how much EBITDA are we getting? Well, in our first year, we're getting just 16, but then that ramps up as we improve our bolt-ons and as we buy more of them. So you can see that for a while it's got excellent growth.

If we then put that into here, okay, what happens is for a price, so for effectively like what? 450, 550, we're getting a whole lot of EBITDA.

And now what we could do is see, right, as that's filtered through into net income, okay, and then we'll go into debt, and then we'll go into the IRR.

You can see that it's lifted up the IRR by about 4% or 5%.

This is the second way that you can get bolt-ons into your model.

Okay. You can just run them really low detail. Okay.

You can have them as CapEx or some other kind of spending, and then fold them into the existing income statement and cash flow statement.

So we've now seen two ways of doing bolt-ons. One, highly complex.

We just had a quick look at it, and one, a lot more simple, and we spent a bit longer on that. Okay, that's about as much as we're going to do on bolt-ons. If anybody wants to see any formulae or wants to talk anything through again, let me know.

I think that, yeah, that's a tricky question.

Probably the best way of doing it is this, in that you're really doing a separate model for each bolt-on, which means you're not assuming they're all alike.

I think the weakness of this, which I do see quite a lot in client models, is that all of these bolt-ons are effectively growing at the same rate and have the same overall performance of what we're buying and what we get from what we're buying. So we're assuming that all bolt-ons are equal.

They all grow at the same rate.

So it's like we're buying a series of identical companies that happen to be slightly different sizes. Okay. So this one is inaccurate. The good thing is it's really, really quick, and if the bolt-ons are not that significant compared to your overall business, then you might not need as much accuracy. For example, if there's no bolt-ons in the first year, just 15 and then maybe 60. So really it's quite a modest uplift, and you can see that it doesn't have that big an impact on the IRR.

Then you might say, "Well, actually, why would I spend a couple of days making a model like this when I can just get an overall ballpark like this?" It'll also depend on what stage you're in.

Kind of this is more like, would it work? And this is more like, okay, I think I'm going to do this.

I need to know in detail what it's going to mean because my stakeholders want a lot of detail.

All right. So simple answer, this is better, but it's very time-consuming.Good question. Just pausing to see if there's anything else.

Okay.

Let's talk about dividend recap then.

So first, just another quick example.

I was casting my net around for a recent example of a dividend recap.

Here they called it distribution recap plan.

This is Fitch talking about Clarios, which is, I believe, a battery maker.

They're saying, right, we're going to award them a credit rating based on X, Y, Z.

And this is quite a good paragraph.

It says: "The revision of Clarios' rating reflects the expected increase in leverage resulting from the company's plans to issue debt to fund a distribution to its sponsors." This is a dividend recap in the real world.

You might be wondering, why am I reading about this on Fitch? I thought this was private equity.

Some private companies issue public debt, in which case they still need ratings, and they still interact with the agencies.

Right. Now, why do a div recap? It's an exit of sorts, and given that exits recently have been challenging, getting the space of PE, exits are highly sought after, and so even creative or partial exits like div recap, or refi, they sometimes call it, is desirable.

Now, arguably, the strategic buyer is the best exit for a PE firm running a fund with a portco, because the strategic buyer would be able to afford synergies, okay, and so they would offer a great price.

IPO is good.

Okay. It's not ideal because you're not going to get a total exit.

Also, you might have to offer a discount, and so you might not get the best exit, but still, it's a good way of moving a block.

And if you still want partial ownership, then as a PE firm, that's quite a good way out.

The worst way out is liquidation.

Okay? It's like a fail state.

And then here's the more creative ways that you can exit.

You can either start selling to another PE player.

They're probably not going to be able to afford as good a price as your strategic player could, so you're probably not going to get quite as good an exit.

Sometimes it's also a bit mysterious why another PE player would want to take an asset off your hands after you've run it for five years. So, for example, here, let's say we run Hilton for five years, and then we run our exit and another PE player comes in and gives 4.7 billion for something we bought arguably for much less. So why would anybody else want it? Well, maybe they think they can get cost reductions we didn't. Or maybe they think they can embark on a bolt-on strategy, which maybe we failed to.

Okay. Or maybe they specialize in assets which are in a different stage, different area.

Okay, so there's all sorts of reasons why another fund might be interested.

You could also even sell it to yourself, as you might think, so a continuation fund.

And in a way, you're not selling it to yourself, you're selling it to a different set of LPs. So you'll distribute to one set of LPs, and then you'll get another set of LPs to buy in.

All right. Now, if none of those work or you're looking for something else, you could do the dividend recap, and it's an exit of sorts.

You're not actually selling the company, but you are receiving cash.

And because it reduces the eventual exit, you could see it as a partial exit.

So that's why you'd want to do it. Now, why would you not want to do it? Well, let's think about it.

Okay, so let's take a just look at an add-on case there.

So what we're going to do... Excuse me, wrong one.

Recap case.

Okay, what we're going to do is we're going to issue a bunch of new debt here on year three, use it to repay debt on year three, that's the original debt, and then the excess, we're going to pay out as a dividend.

And that means all things, all else being equal, you've now got a company which, again, is empty of cash and is even much more levered than it would've been.

Okay, so if we have a look at the leverage, you can see down here that the base case, the leverage, I believe, was six times.

And our modified base case is obviously going to be pretty good.You can see that we're getting a hold of that leverage and paying it down pretty quickly under the base case.

But under the recap case, because we're going to start paying down and then time three comes along, whoops, change our mind.

Okay, we're going to lever right back up again.

So you've now got a company that's got way more leverage than it would have had, and no extra cash or CapEx or anything like that, or bolt-ons.

So it's just more debt, no cash, and so it's a slightly less attractive proposition for potential buyers.

And so the idea is that it kind of hollows out or weakens the company and it can create quite a lot of bad press as well. Okay.

I think div recaps can be very controversial.

All right. That's the background, and we're not going to do too much on the number work, so we'll just do a little bit of playing around.

But feel free to ask questions now about kind of the context of a div recap.

All right. Now, if I just tell you some of the pitfalls of div recap.

Okay.

Just play around with some numbers.

If we have a look at the stuff that's under Felix, and if we look at the complete file.

All right. Now, if we have a look at how the recap works here in this version, which is not in the downloads that I signaled.

All right. And we have a look down at debt servicing.

Can you see that here we've got senior debts, and can you see here we've got the recapitalization? All right. And then take a look at the interest formula.

Okay. I'd argue that that is not the best.

Okay. This is a complex area, and so it leads to complex formulae. Fair enough.

But this formula is way too difficult, and what it's trying to do is be a jack of all trades and say, "Look, if the recap is happening at all, and if it's the right year, then move on to, okay, the new rate." Okay. But there's now two rates in the model, and so we need to say to that line, okay, if you're in the old rate, go for the old rate, and if you're in the new rate, go for the new rate.

And that creates some really tricky interactions where you end up with all these ifs and ands and mins and maxes and stuff.

And so I would not recommend that you do recaps this way.

What I'd recommend is that you do it this way and just keep it super basic. Okay. If in doubt with modeling, split out.

Okay. And try and avoid having things in one cell.

So rather than having unsecured and secured as individual entities and then adding to them in the recap year and having to transition to a new rate and perhaps a new behavior, what I would recommend that you do instead is just have the old debt as the old debt, and then when the time is right, get rid of it.

And then have the new debt as entirely new block, and then when the time is right, borrow it.

That way when it comes to interest expense, there'll be no fiddly transition between old and new, and this extends to other things as well.

Okay, so you could have things like pick toggles or prepayment penalties or amortization schedules, which are different.

The problem with this method is it just assumes the senior debts, the old and the new, are going to be exactly the same.

Okay, so I wouldn't recommend it. I'd split everything out.

Okay.

Oh, yeah, Hermes. I think it's a really good point, and I think in the real world, there'll be a bunch of stuff which depends on the level of risk which the lender perceives in the borrower.

And so, in case anybody else is interested, okay, go to metrics and loan agreements.

Okay, it's quite likely that, for example, the sweep, when you've got a debt to EBITDA of, say, two plus, then you might be asked to sweep 100% of your available cash.

Okay. And then let's say you've got debt to EBITDA of, say, you know-To two.

That's work.

Then it might be that you can keep some of that, and you can put that into whatever you want, bolt-ons, CapEx, whatever. Okay? And you'll end up with these bandings.

So here's the sweep, and then you might also have that on an interest rate, okay, where you might have an interest rate that's relatively high, okay, if you are at a high risk and much lower, these are made-up numbers, if your risk is lower. I think, Hermes, it's a good point, but just imagine that this could be the old debt, and then we might have an entirely new set of circumstances when the recap comes in, which might be two or three years later, right? And so if the recap comes in and we've got a more established business, it might be that we're offered lower rates, a lower sweep, okay, or higher, depending on how things are looking. Although higher than 100% isn't.

But can you see that, again, having things in one block like this doesn't allow you to do any kind of flexibility, okay? And so I would urge you to have different blocks for your different finance when you're doing refinancing. I think it works so much easier.

It's a good question, Hermes. Does that answer your question? Is that kind of the direction you were going in? Yeah. Great.

Okay.

Now, let's actually have a look at the result. Okay.

We won't go into the mechanics too much.

So I can actually turn off the recap entirely using that switch.

If you look, anything to do with the recap has that switch baked into it.

Okay, and that means if I set the switch to zero, everything basically defaults to the base case, and so we've got 26.1 with the recap.

We're releasing a bunch of cash early.

It's a worse exit, but that's later.

And so early benefit is good, and that has a good effect on the IRR. But the argument is that the sentiment around the exit might be damaged by this, and so we may have underrepresented the native aspects of the dividend recap on the exit.

All right. That's about as far as I want to go with div recap, so I'll just pause there and see if anybody has any questions.

Okay, if you're typing, keep typing.

We've got a little bit of time left, and so what we'll do is just talk through a little bit this idea of management incentives.

Okay. There's one message that I want to send you away with here.

It's really nicely demonstrated by the workouts here.

Let's grab the full file.

Okay.

All right. Now, what we've got here is we've got a situation where we've got a management roll.

Okay, and what that represents is they're going to roll forward some of their pre-acquisition equity.

Let's say this is director options.

No, or just simple stock holding. And so management are going to put 250 mil in, and then the fund needs to top that up with 9.75 bill.

Great. So that's the management roll.

And I'm assuming you know roughly what that is.

Okay. Now, what's going to happen is you're going to have some negotiable perks.

They're completely negotiable, okay? There's no standard here as far as I'm aware.

And so it would be down to the power and desirability of the management team versus the fund.

And so they may be able to negotiate even better perks than this or much worse. But just to be clear, these perks are very, very generous.

Now, what management have negotiated is if there's a reasonably okay exit, they'll end up with another 2% of the company.

Okay, and that's going to come out of the fund's slice.

If they have a pretty good exit, they'll have another 4% on top of that, which will come out of the fund's slice again. And then if they have an exceptional exit, we'll give them another 6%, and so now the fund will have gone down to 86% holding, all the way down from a modest exit where the fund would be 96% of the exit.

Okay, and this would be packaged like options.

They probably have a strike of some kind.

Okay, and these are three scenarios. They're not all three going to happen.

Okay. And looking at it, you could think, well, that's extraordinarily generous.

Isn't this too generous? Yeah.

Now let's take a look at what happens at the end and not worry about the mechanics in the middle too much.Now, here's what happens to management.

So given that management only put 250 mil in, that's their role.

And given that management are likely to have pretty bonanza exit if they get handed a bunch of options in a good exit, their IRR can really skyrocket here.

Again, and here's my note, this may seem excessive.

So you could be looking at it thinking, "Why are we treating management so nicely?" Okay. Here's what happens to the fund.

On a modest exit, they're not going to be very happy with that, but it's not a complete loss.

An okay exit is about 18, so that's pretty good.

And then a great exit, three times. Okay, we're at 25%.

Okay, so here's the last thing I want to do, which is send you away with what I think is an important lesson, which is that the management incentive package can often afford to be quite generous.

All right. I'm going to grab those, chuck them down here as values.

Okay. And that's the original.

Now, what I'm going to do is I'm going to imagine that I don't give management anything at all.

All right. The first thing I'll do is I'll remove their role.

Now, what's good about that is that management walk away with another 250 mil now.

But can you see there's now nothing tying them to the company? I'm also going to remove these options, which we could call the ratchet.

That means that the PE fund is keeping the entirety of the equity for itself, and it's not doing any kind of role, and it's not doing any kind of ratchet giveaway.

Management now have no skin in the game, and that means they're less likely to do a great job for the fund.

You could say, well, maybe that's worth it if the fund can get a great exit.

Okay.

Can you see that the fund's exit has only gone up by a couple of percent point at best? What we're looking at there is a function of the fact that actually the management portion is really small.

So if I undo all my changes, you can see that proportionally, although the IRR on that is very high, it doesn't actually take that much off the fund.

And so despite having a really good percentage return, it's not actually that damaging to the fund's IRR.

And so the fund might see it as worth it from the point of view of having really incentivized managers who are going to hit their targets and create a really good exit for them.

It's probably more important to the fund that you get this at all, rather than getting it with another 2% on top.

Or let me put it another way, it's really important to the fund not to end up here.

And by giving management an extremely strong motivating package towards a good exit, you're much more likely to get there at the cost of what? 2% IRR, which doesn't seem that expensive, really. And so that's the lesson I want you to walk away from this with, which is that management incentivization packages are often negotiable and sometimes behave in ways you might not expect, because they're not that impactful in some ways to the overall fund IRR. Perhaps not as much as you think they might be.

Okay. So that was a quick version of this. Okay.

We didn't go into the mechanics too much, but hopefully it made a little bit of sense and gave you some key messages there.

Any questions on the ratchet or on management incentivization on the whole? Okay. It's 10:02. I think we'll wind down there.

I'm not going to start anything new now.

Hopefully, that was useful. Whistle-stop tour through three advanced ideas for LBOs. If you wanted to go further with them, hopefully, I've made it clear that under private equity, you've got all three of those there.

Okay. And I would probably budget about half a day each if you're going to do those properly. So just take care with them.

Don't expect to get them done in an hour.

They're complex ideas to which you've had an introduction now.

Okay. And that sets the tone and the context.

Hopefully, that's been helpful to you.

And you're welcome, Hermes. Thank you very much for the questions. Always good.

Keeps me on my toes.

If you're logging off now, have a nice rest of the day, afternoon, morning, evening, wherever you are. And I hope you have a nice weekend.

And if you're sticking around, feel free to ask questions. Okay.

Thanks, everybody.