The Edit. 10.13.2025.
Forging the Future of Finance.
Week of October 13th, 2025
Market Update
Goldman set to acquire Industry Ventures in $965 Million dollar deal, with hopes the venture firm's secondary investing prowess will add edge to it's alternatives business.
In international news, lottery operator Allywyn and Greece's leading gambling company seek to join forces in $18.6 Billion merger that would catapult the combined firm to the forefront of the European gaming industry.
JPMorgan unveils a 10-year, $1.5 trillion investment plan to support U.S. “strategic industries,” including defense, energy, advanced manufacturing and frontier tech, committing up to $10 billion in direct investment.
Auto-sector bankruptcies (First Brands, Tricolor) are drawing heightened scrutiny across Wall Street, spotlighting credit risk in CLOs, unsecured debt, and leveraged finance amid losses at banks and funds.
Deal of the Week
Brookfield to Acquire Remainder of Oaktree in $3 Billion Deal
On 13 October 2025, Brookfield Asset Management announced it would acquire the remaining 26 percent stake in Oaktree Capital Management for approximately USD 3 billion, cementing full control over the alternative asset manager. Brookfield will fund the acquisition via contributions from both Brookfield Asset Management (~USD 1.6 billion) and its parent entity Brookfield (~USD 1.4 billion).
Brookfield had originally acquired the majority of Oaktree for around USD 5 billion in 2019—a move intended to scale its private credit and alternative asset capabilities. At closing, the combined platform will position the U.S. as Brookfield’s largest market, representing ~$550 billion in assets and contributing over half its revenue and headcount.
Oaktree, founded in 1995, specializes in distressed debt and as of 30 June 2025 managed ~USD 209 billion in assets. With full ownership, Brookfield expects to consolidate fee-related earnings: over the last twelve months, including full Oaktree, Brookfield Asset Management generated ~USD 2.8 billion in fee-based revenues.
In terms of leadership, Howard Marks, Oaktree co-chairman, will remain on Brookfield’s board; Bruce Karsh, Oaktree’s CIO, will join as well. Oaktree’s co-CEOs Robert O’Leary and Armen Panossian will become co-CEOs of Brookfield’s credit business. The acquisition is expected to finalize in Q1 2026, pending regulatory and other customary approvals.
Why This Acquisition Matters
Strategic Consolidation Of Credit/Alternatives Capability
By taking 100 percent control, Brookfield can more seamlessly integrate Oaktree’s credit platform with its broader alternative asset operations, boosting scale and cross-product synergies.
Competing Against Giants In Private Markets
The move strengthens Brookfield’s competitive position versus major alternative asset firms (e.g. Blackstone), particularly in private credit and distressed investing.
Revenue Mix Tilting Toward Fees
Oaktree provides a robust stream of fee-based income independent of market cyclicality in mark-to-market assets—a desirable structural shift for Brookfield’s earnings stability.
Leadership Continuity Eases Integration Risk
Retaining key Oaktree executives and board members helps preserve investment culture and institutional knowledge, mitigating disruption from full takeover.
Interview Prep Questions
Associate - M&A Deal Advisory
Question: How do you evaluate a §338(h)(10) (or analogous step‑up) election, and where do the tax basis step‑up benefits show up in purchase accounting and in a DCF?
You’re being tested on:
Connecting Day‑1 PPA entries to ongoing cash‑tax shields and avoiding double counting in valuation. A step‑up treats a stock deal as an asset acquisition for tax, increasing tax basis of acquired assets to fair value. In the PPA you still book assets at fair value for book; tax basis also steps up, creating DTAs/DTLs only where book and tax differ. In the model, the incremental tax depreciation/amortization shield lowers cash taxes until the step‑up is exhausted.
Core concept:
Quantify the step‑up allocation to PP&E and finite‑life intangibles; set tax lives by jurisdiction.
Compute incremental tax depreciation/amortization vs. no‑step‑up case; flow into cash taxes (not EBITDA).
Record DTAs/DTLs only for remaining book‑tax differences; if tax and book both step up equally, no DTL arises on those assets.
Reflect any gross‑up payment to the seller for providing the election in Sources & Uses (affects equity cheque, not EV).
Run sensitivities on utilization limits, recapture rules, and cross‑border withholding that affect the realized shield.
Common pitfalls.
Counting the shield twice: lowering cash taxes and capitalizing the same benefit into higher EBITDA.
Assuming full utilization without checking limitation regimes (e.g., US §382, ring‑fencing, minimum taxes).
Ignoring seller indemnities or gross‑up economics that change the true cost of the election.
Creating DTLs where book and tax both step up equally—there may be no temporary difference.
Analyst - Sales & Trading
Question: How does a DV01‑neutral 2s5s10s Treasury butterfly capture carry and rolldown, and what risks can erode the expected P&L?
You’re being tested on:
Curve geometry, sources of carry, and how to neutralize level risk while managing residual exposures. A classic 2s5s10s butterfly is long the belly and short the wings (or vice versa) sized so total DV01 ≈ 0. P&L comes from the 5‑year bond ‘rolling down’ a steep segment of the curve and coupon carry, while the 2s/10s hedges level moves. The trade expresses a curvature view: the belly richens/cheapens vs. wings over time.
Core concept:
Size legs by DV01 so net duration ≈ 0; isolate exposure to slope/curvature rather than level.
Estimate expected P&L from carry (coupon − funding) and rolldown (belly moving to lower‑yield tenor along the curve).
Implement with cash bonds or futures equivalents (ZT/ZN/UB); adjust for CTD DV01 if using futures.
Track catalysts: refunding announcements, QT, data prints, and belly issuance that shift relative value.
Stress for slope shocks (2s5s, 5s10s) and basis between futures and cash; set stop‑loss on butterfly spread moves.
Common pitfalls.
Calling it DV01‑neutral but ignoring convexity; residual second‑order risk can dominate in large moves.
Using cash DV01s with futures without CTD conversion, mis‑sizing the hedge.
Funding/roll costs overwhelming expected carry when repo specials or margins change.
Forgetting liquidity: belly bonds can gap on auction days, flipping expected rolldown.
Associate - Corporate Banking
Question: How do you model NOLs and valuation allowances in an acquisition, and where do they affect purchase accounting and post‑deal cash taxes?
You’re being tested on:
Recognizing DTAs only when realizable, jurisdictional limits, and how NOL usage flows to FCF. Pre‑existing NOLs create a deferred tax asset (DTA) recorded in the PPA net of a valuation allowance to the extent utilization is uncertain. Post‑close, utilized NOLs reduce cash taxes (not EBITDA). The model must respect jurisdictional rules, limitation regimes, and expiries.
Core concept:
Estimate NOL utilization schedule by taxable income forecasts per jurisdiction; apply carryforward limits/expiries.
Record DTA at acquisition for the portion more‑likely‑than‑not realizable; set a valuation allowance for the rest.
Check change‑of‑control limitations (e.g., US §382) that cap annual NOL usage and require model haircuts.
Flow NOL usage through the cash tax line; keep GAAP tax expense separate if book/tax diverge.
Disclose step‑ups or restructuring that alter future taxable income (affecting allowance releases/charges).
Common pitfalls
Booking a full DTA without evidence of future taxable income—auditors will require an allowance.
Applying group‑wide NOLs to foreign profits without respecting ring‑fencing.
Treating NOL benefits as above‑EBIT impacts; they affect cash taxes and equity value, not EBITDA.
Ignoring minimum taxes or BEAT‑like regimes that limit effective benefit even when NOLs exist.
