Preparing for what’s ahead: A strategic planning framework for business owners

(DESCRIPTION)

Logo: J.P. Morgan. Text: Please Note: This session is closed to the press. The views and strategies described herein may not be suitable for all clients and are subject to investment risks. Certain opinions, estimates, investment strategies and views expressed in this document constitute our judgment based on current market conditions and are subject to change without notice. This material should not be regarded as research or as a J.P. Morgan research report. The information contained herein should not be relied upon in isolation for the purpose of making in investment decision. More complete information is available, including product profiles, which discuss risks, benefits, liquidity and other matters of interest. For more information on any of the investment ideas and products illustrated herein, please contact your J.P. Morgan representative. Investors may get back less than they invested, and past performance is not a relable indicator of future results. This information is provided for informational purposes only. We believe the information contained in this video to be reliable; however we do not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage arising out of the use of any information in this video. The views expressed herein are those of the speakers and may differ from those of other J.P. Morgan employees and are subject to change without notice. Nothing in this video is intended to constitute a representation that any product or strategy is suitable for you. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting legal, tax or other) given by J.P. Morgan and/or its officers or employees to you. You should consult your independent professional advisors concerning accounting legal or tax matters. Contact your J.P. Morgan representative for additional information and guidance concerning your personal investment goals. J.P. Morgan is not responsible for information provided by guest speakers (unaffiliated with J.P. Morgan) or the use by attendees of such information J.P. Morgan cannot verify the accuracy of guest speaker content, views of statements, and accepts no responsibility for any direct or consequential losses arising from its use. Any discussion of companies/markets by guest speakers should not be interpreted as a recommendation to buy or sell or is an endorsement by J.P. Morgan. Investment and Insurance Products: Not a Deposit, Not FDIC Insured, Not Insured by any Federal Government Agency, No Bank Guarantee, May Lose Value.

(SPEECH)

NARRATOR: This session is close to the press. Welcome to the JP Morgan webcast. This is intended for informational purposes only. Opinions expressed herein are those of the speakers and may differ from those of other JP Morgan employees and affiliates.

Historical information and outlooks are not guarantees of future results. Any views and strategies described may not be appropriate for all participants and should not be intended as personal investment, financial, or other advice. As a reminder, investment products are not FDIC insured, do not have bank guarantee, and they may lose value. The webcast may now begin.

[AUDIO LOGO]

(DESCRIPTION)

On a black background, a gleaming gold signature logo appears in script: J.P. Morgan.

Text: Ideas and Insights. Steven Faulkner, Vice Chairman, Head of Private Business Advisory.

(SPEECH)

STEVEN FAULKNER: Hello, and thank you for joining today's discussion, preparing for what's ahead, a strategic framework for business owners. My name is Steve Faulkner. I'm a Vice Chair and Head of Private Business Advisory at JP Morgan's Private Bank. I'm joined today by two distinguished colleagues, Melissa Smith, Managing Director and Co-Head of Commercial Banking at JP Morgan, and Michael Flynn, Managing Director and Head of small cap investment bank at JP Morgan.

Business owners today are making transition decisions in an environment shaped by interest rates, inflation, labor costs, geopolitical volatility, supply chain adjustments, regulation, and sector-specific disruption. Uncertainty doesn't eliminate the need for planning, it raises the bar for preparation.

Today's conversation is designed to help private business owners think earlier, strategically and holistically about business transition topics. We're going to cover themes touching on the market environment, value creation and transaction readiness, ownership transition strategies, including sale, retention, governance, and legacy planning. And finally, the role of technology, artificial intelligence, and operational readiness in building resilient businesses.

I'd like to start, Melissa, with you and asking a question.

(DESCRIPTION)

From left to right, Michael Flynn, Melissa Smith and Steven Faulkner sit before a gray wall emblazoned with a J.P. Morgan logo. A long counter in front of the three panelists holds their tablets and water glasses.

(SPEECH)

You talk to business owners frequently. What's the prevailing business owner sentiment today with regard to the macro economy and geopolitical events?

MELISSA SMITH: Sure. So I would say that business owners are cautiously optimistic overall in terms of their sentiment.

(DESCRIPTION)

Text: Melissa Smith, Co-Head of Commercial Banking.

(SPEECH)

If you look at where we started the year, our 2026 business leaders outlook survey showed that about 71% of middle market business owners were optimistic about their prospects for their specific company over the course of the year. So that's some context setting for where we started.

Taking a step back, though, and thinking more about the broader macro environment. I think resilience really continues to be a major theme overall. You have tailwinds that include continued fiscal stimulus and tax refunds, obviously, that were driven by the one big beautiful bill act, a massive amount of AI-driven capital investment that continues overall. And that investment is also driving some expansion in the manufacturing sector, which we obviously haven't seen for quite some time.

On the other side of the coin, some of the headwinds from a macro perspective clearly include geopolitical uncertainty with the conflicts in the Middle East and in Ukraine. Clearly, concerns around oil prices and inflation overall, as well as tariff uncertainty and really pretty large global fiscal deficits across the board.

So I say cautiously optimistic, because I think most companies feel pretty bullish about their own company's prospects, a little bit less optimistic or more pessimistic just given some of the uncertainty I just mentioned on the broader macroeconomic outlook.

Interestingly, we are certainly seeing an increase in overall CapEx and M&A activity, which I think certainly points to some confidence from CEOs across the board. And if you look at public companies specifically in their capital allocation strategies as a proxy for the broader market, you're certainly seeing more companies put money or invest in M&A and CapEx, as I just mentioned overall.

That CapEx is very much driven by AI investments across sectors, not just within technology specifically. And M&A volumes, which I know Michael will speak a little bit about, are up about 44% year to date. That is very much driven by some of the large mega transactions. But I think for $2 billion-- transactions that are size $2 billion and under a pretty steady state in terms of continued activity there.

(DESCRIPTION)

Steven turns toward Melissa.

(SPEECH)

STEVEN FAULKNER: Yeah, I love that business owner survey. I would encourage everybody to subscribe and read it. And one of the things that I love about it is the dichotomy of how business owners think about as entrepreneurs. My business I feel bullish about, but boy, I'm worried about everybody else's business. And it's really interesting and I think it fits into that business owner psychology.

Michael, I'm going to ask you to put on your sell side lens for a moment and answer the same question, but from the context of how do you think about it affecting clients as you speak to them around more of a transactional theme. And so what are you hearing from business owners?

MICHAEL FLYNN: Yeah, I would echo what Melissa said in terms of I think, in general, business owners are quite constructive today, in view the market is being receptive to M&A.

(DESCRIPTION)

Text: Michael Flynn, Head of Small Cap Investment Banking.

(SPEECH)

I would say that they look at the public markets and they see markets in many both S&P and NASDAQ at or near all time highs, which gives them a lot of confidence.

They are very much aware though, that there is a different bar out there for M&A today than there was perhaps in 2021. And so while they believe that the market is open for good businesses, they understand that the market is much more selective as well. And therefore understand that getting ready and being prepared when the market is right is very important today.

STEVEN FAULKNER: Yeah. So I mean, I think what both of you have said is spot on in terms of my own conversations with business owners. I would start, though, with business owners-- studies have shown business owners tend to be very optimistic as a cohort. I think that's fundamental to being an entrepreneur. You're optimistic. You can solve problems that other people can't.

But I would also say there's a recognition today that we're in a different operating environment. So if I go back nearly 20 years ago. So let's take the Wayback Machine to 2007, right before the global financial crisis, the slight majority of my business owners self-identified as wanting to retain the business multigenerationally. We go through that seminal event of the global financial crisis, and then all the volatility that we've seen since then, and today that number is down to 20% to 25%. So now the overwhelming majority self-identify as we will transact. That's our path. It's not retention.

So I think it's important to acknowledge that business owners, while they are optimistic they see the changing environment. And I think some of them are questioning, do I want my family to continue to be invested in the business, given some of the hurdles they're facing. I want to switch now. And Michael, I'll start with you.

If you could take a moment and speak to us about where are the current merger and acquisition market indices for US middle-market companies. But first, if you could define for me, what do we mean when we talk about middle market? Melissa talked a little bit about it from her context. But how do you think about it. And specifically then small cap. What does that mean?

(DESCRIPTION)

Melissa nods and smiles as she turns toward Michael.

(SPEECH)

MICHAEL FLYNN: We think about middle market in general to be companies with revenues from 20 million to 2 billion. That said, when you think about small cap, we define that more as companies that would trade or with enterprise values around $100 to $500 million in size. So that's how we think about it.

As Melissa said, I think M&A volumes have been very strong year to date in quarter, year over year markets, the M&A volumes are up 45% or so. So that points to a very much open for business and open for M&A environment. That said, I think there are a bit of tale of two markets going on as well. Markets were-- volumes were very much driven by large cap, large deals. Nearly 50 deals actually took place, greater than $10 billion year to date, and so that's a big number.

So the middle market and small cap deals are more-- it's more nuanced in that market. Good businesses strong businesses with good out-- strong outlooks. Quality financials, quality management teams. Those deals are getting done, and getting done at strong multiples. Deals that-- or businesses that are looking to come to market that may have some diligence issues. Those are getting done at-- with a much more risk lens, I would say. And so it's certainly a tale of two markets today.

(DESCRIPTION)

Steven turns toward Michael.

(SPEECH)

STEVEN FAULKNER: And my experience was 2022 through 2024, we had a gap between buyer value expectations and seller kind of value expectations. Where are we today? Has that gap you eliminated? Is there still a gap in terms of expectations? You talked about good assets versus maybe not as good an asset.

MICHAEL FLYNN: Yeah, interesting. When you look at the average multiples paid in M&A today within the mid-cap segment, I would say that the average is pretty much spot on around 10 times or so. That said, there is again, very strong businesses are going for what we call a quality assets, are going for double digit multiples and could be high teens as well, multiples.

But businesses that are getting done, businesses with diligence issues are getting done at a much more below the 10 times average. And so there is tends to be, I would say buyers tend to lean in on the high-quality assets, which can then get there and meet seller expectations quite quickly. But on the bottom end, the much more discerning. That's where really that I would say that gap exists between the buyers and sellers. And private equity or buyers in general, have a much more time, much more difficult time I would say, meeting seller's expectations.

STEVEN FAULKNER: Yeah. And if we stay in that kind of small cap space. What are you looking at specifically to tell you, this is going to be when the small cap market just opens up? Is it interest rates? Is it availability debt? Like what is the one or two things that you look to?

MICHAEL FLYNN: Yeah. Rates are very important. And access to capital is absolutely very important. I would say in connection with that, private equity is participation in the marketplace is key as well. And in many instances their investment thesis and/or their underwriting of M&A depends on both of those things, access to capital and interest rates. So those are very much key. And those in terms of getting greater confidence around the outlook for interest rates as well, I think will be key to getting private equity off the sidelines.

STEVEN FAULKNER: Yeah, very, very helpful. So Melissa, I want to think about, we all know it's about time not timing, but timing is still important. And so we heard Michael talk about where is the M&A market right now. What's the right time for business owners to begin engaging with professional advisors, including the banking teams that they work with, they partner with? So to help me think about that.

(DESCRIPTION)

Melissa turns toward Steven.

(SPEECH)

MELISSA SMITH: So I think the owners who get the best outcomes definitely start those conversations much earlier than they think they need to start them. And so that's not at the time that they've decided to sell the company or take on some sort of investment, but really when they're starting to think through alternatives overall. So that's definitely the advice that we would give.

And we definitely encourage clients to be very open with us because we can help them think through their overall strategy, again, the various alternatives in terms of sale or minority investments, their capital needs, liquidity planning, all of those things, and put that together in a coherent roadmap for the company overall.

And I think some of that earlier dialogue with their banking teams helps avoid some surprises that could come later on in the process if they're not prepared, things like financing constraints that they weren't aware of in terms of what's happening on the market, reporting gaps that they have, customer concentration, issues that we think will be an issue from a diligence perspective, or just some working capital volatility that might be showing up at just the wrong time.

We also help companies think through, obviously, the overall investor landscape in terms of which type of investor that they may choose to partner with or ultimately sell the company to, which is obviously an important part of the overall transaction planning. And that's also, quite frankly, why we have multiple different teams across JPMorgan that can really help with some of those discussions. I think, Steve, your team's a great example, helping owners particularly think through succession planning and what all of those alternatives may be.

And then as Michael was just discussing, we have a small cap investment banking team, very much focused on smaller sized companies and mid-cap investment banking team. So really just making sure we have the right team that's focused on the right client segment in order to achieve the best possible outcome for the client.

STEVEN FAULKNER: Yeah, I think that's helpful. Going back to the preparation for a sale process, what's one or two areas that business owners are surprised by how long it takes? And I think the increase in buyer diligence and maybe many business owners don't understand that really took off as a result of COVID. Like, what are the things that sometimes business owners are surprised to find out that they're important and it takes longer maybe than they think to prepare for?

MELISSA SMITH: Absolutely. So I think what owners often underestimate in terms of the preparation is really just the very early work to get prepared to tell the story. And again, I think working with your banking partner to make sure that you've crafted a story, that you have the right KPIs, that again, you have the right sort of reporting and financial numbers in terms of clean monthly numbers, support for adjustments that there may be.

So all of that crafting of the story ahead of time before obviously you're opening a diligence room or going out to buyers in any way, shape, or form. And I think, again, that's where one's banking partner can really pressure test that story and pressure test the financials and really dig into where they may think investors will have questions.

And I would also say I think just given how active overall that we are on the market in terms of the number of transactions, that's really allows us to be able to pinpoint upfront for the owner and for the company overall, where we think investors may want to dig in, where we think investors may have questions. So again, ultimately we can all be more prepared as we go through that process.

STEVEN FAULKNER: I think that's just words of wisdom. So as we all know, we are run by Jamie Dimon. And one of the things we've all heard Jamie talk about is the fortress balance sheet. And I've been thinking lately, what does that mean for our clients? Like, how should they adapt that as a paradigm as they think about their business. And Melissa, I think in your role, there's no one better to talk about that than you.

MELISSA SMITH: Sure. So when I think about a fortress balance sheet for a company, I think that means having enough liquidity available, whether that be cash on-hand or just access, obviously, to the market, in order to really be able to take advantage of an opportunity when it arises. And I think, probably even more importantly, to make sure that company can withstand any adverse economic outcomes or cycles, right back to our earlier comments around there's a lot of uncertainty in the macro environment today.

On our side from a commercial banking perspective. We often start with helping the companies think about treasury and operational readiness, because that's a great way to build enterprise value before a sale. And I also think really encouraging companies to think about cash management and their treasury operations as a strategic asset and really building a strategy around it versus something that you're not spending day-to-day thinking about.

And I think practically that means a few things. That's kind of improving cash visibility, that's obviously improving overall working capital cycles, making sure you're shifting forecasting from a spreadsheet exercise to a much more repeatable process with clear assumptions and KPIs overall.

And I think that just helps, again, the diligence process go much more smoothly as well as, again, just make sure that the company is operating at the highest possible level in creating the most possible value before you decide to do any sort of transaction overall.

And once we spend time of optimizing again, kind of working capital in those treasury operations, then clearly spending time with the companies thinking about ultimately their financing alternatives, access to the markets as a whole. Again, all of that in kind of preparation for how a sale may occur.

STEVEN FAULKNER: Yeah, I would reiterate that. I see a lot of business owners that haven't paid enough attention, particularly to that cash management aspect. And they can pay the price. And when they go through that diligence process, it puts more pressure on Michael when he's representing those companies to talk through. Here's the real financial performance of the business that sometimes gets blurred by improper cash management practices or just frankly, from when the business was much smaller. And today it's at a more significant level and it needs to be professionalized.

So I'm going to turn to the next question, and I'll put myself on the line to answer that one first.

(DESCRIPTION)

Michael and Melissa smile at Steven.

(SPEECH)

But I want to talk about how business owners should think about the different options for transition. And those options range from I want to retain it multigenerationally, I mentioned earlier that's somewhere around 20% to 25% of our clientele.

And the rest are more on a transactional spectrum. But that spectrum can range in terms of different options. You can have sales to a strategic buyer, sales to private equity. It could be a minority recapitalization, a control recapitalization. You might be the platform, you might be the tuck in. And maybe Michael you can give a little explanation of what that means. There's employee stock ownership plans as a potential option, family office buyers.

And too many times when I talk to business owners, they've locked into a potential buyer without actually thinking about is that the right outcome for me and my business. And so what we want to do is to think about the north star isn't the identification of the buyer, your north star should be what do you want to achieve with the business, like what's most important to you.

And is it wealth accretion maximization of value? Is it concern over the c-suite of executives that have worked with you for decades to help achieve the success? Is it all the employee base? Is it the communities in which you operate? And depending on how you answer those questions, to me that begins to illuminate the right outcome as opposed to you talk to somebody at the country club or you got a call from an advisor who said, this is what you should do.

I think it's really important to think about how do you harmonize the corporate balance sheet with the shareholder personal balance sheet. Because if you only focus on one, you will lose value. Like that's not a concern. It's a real outcome.

(DESCRIPTION)

Michael and Melissa nod.

(SPEECH)

I think deal structure sometimes is underappreciated. Sometimes I'll talk to business owners and they'll say, the most important thing is price, price, and price. And what I say, no, I get it. Price is very important. But deal structure is equally important, because that's where the risk gets shifted. And if you don't know it going in, and if you don't have the right advisors, you're going to be taken advantage of in that process.

So Melissa, maybe I'll start with you. And I've laid the framework of all these different panoply of options for transition of a business. But let's bring it down to real application. So what are the operating and financial questions owners and operators need to ask themselves regarding value preservation, control, risk, like those types of things as they think about the desired outcome?

MELISSA SMITH: Sure. Well, I think you really articulated it well, Steve, because I think it just starts with ultimately what that owner's objectives are in terms of how much control they want to have over the business, post a transaction. And I think that answer can vary very significantly depending on the individual.

And I think also are there-- for a family owned business, are there obvious successors, right, within that business today. And do those children for instance want to stay involved in the company. So I think that's the key critical question just to start with, before one can even think about what the potential alternatives may or may not be.

And I think from there, we can obviously lay out again the right sort of landscape of potential buyers and/or investors for that company overall. And then think about, again, the financial ability of what that transaction could look like for whoever that buyer may be.

And then I think, one of the things that as you already mentioned, that people maybe underestimate as well, is really thinking through. And this is where we bring in our partners from the private bank, really thinking through what their personal liquidity needs are going to be post that transaction. And I think making sure spending-- sometimes it might be 18 to 24 months upfront, right? Making sure you have the right corporate structure, the right transaction structure to maximize proceeds to the owner, if again, that is ultimately the objective. So those are some of the things just this broadly that we think about.

STEVEN FAULKNER: Yeah, and Michael what are the key differences an owner should understand when considering a strategic buyer versus a financial sponsor or private equity buyer?

MICHAEL FLYNN: Yeah, I think you said it very well in terms of what we try to understand is what we're trying to solve for or what the seller's objectives are. So if the seller, for example, wants to sell the business and just walk away, a strategic may be the best buyer for that business, where there typically is a transition period with the new owner, and then eventually they exit the business full stop.

That said, if the objective is to find a partner to help grow the business, potentially, a private equity firm, maybe a very attractive buyer. Now, that can be a minority or that could be a majority. And those are things to think through as well. What role do you want to play in the growth and/or in the next phase of that new business?

So if you want to be very involved, if you want to maintain control and find a partner that where you share decisions in, perhaps you want to buy-- you want to have a minority buyer. And as a result you continue to be a key decision maker in terms of-- and you can continue to be a key driver of that business go forward.

Now, in many instances as well, the current ownership and/or the current leadership team is not perhaps equipped or less equipped to take the business going forward in terms of the growth opportunity. And therefore you may look for a majority buyer, and that owner comes in and provides additional support for the business. It could be operational support, financial support, additional management team support, whatever that may be, to help drive that business forward. So it's all about really the objectives of the business owner.

(DESCRIPTION)

Steven nods.

(SPEECH)

STEVEN FAULKNER: Wonderful. So Frank Sinatra had a song, "I did it my way." And I think maybe that should be the theme song for our entrepreneur founder clients. But in that song, there's a famous start a line that says, I've had regrets. I had a few. I want to talk about their regrets, because I've had and I'm sure you've had many business owners say, what are the war stories and what did other people similarly situated do that they did it wrong.

So Michael, maybe I'll start with you now. What are one or two things that through your experience, you've heard business owners say, I wish I would have known this in advance?

MICHAEL FLYNN: Yeah, I would say in we definitely provide this level of advice upfront in terms of preparedness and advanced thought process in advance of a transaction. But I think business owners tend to underestimate the amount of work that goes into a transaction. And no matter how many times we tell them how difficult and/or how taxing it may be on the team, they tend to underestimate that. So I would say that would be one.

The other thing I would say is financial preparedness. Having a team or a finance team that let's say is equipped from a tax reporting perspective and/or reporting to your lender's perspective is one thing. But having a team that is able to withstand deep financial diligence through a transaction, institutional level diligence, can be a different story. And so financial preparedness, having a team supported by a CFO who can lead that process. Lead that diligence is, I think, another key takeaway in tends to be underestimated in terms of the rigor there.

STEVEN FAULKNER: Yeah, I think those are all first of all, I'm hearing a theme from both of you, which is the importance of financial diligence. Sounds like it's paramount in this process. I've also seen where to your point, business owners have underestimated and as a result, performance has dipped at the absolute worst time, which is during maybe the lockup of exclusivity.

Melissa, in your position as co-managing head of our commercial bank, I'm sure you've seen this a number of times. What are one or two things that you've heard frequently from clients where they lament, I wish I'd known this or I wish I'd done something different?

MELISSA SMITH: Yeah, I completely agree with Michael's comments. And I think just making sure that the organization has enough bandwidth to get through that sale process in the diligence process because keep in mind, you have to actually keep running the business. And as you just pointed out, make sure the business is doing well, while at the same time, you have a whole team trying to help buyers complete their diligence. So I think there's real bandwidth kind of required there.

And the second thing I would just add is making sure there's enough capital markets fluency within the organization. I think it's helpful to start thinking through a little bit what those alternatives are, being a little bit more familiar with some of the various M&A transaction structures, types of investors. So just being a little bit more prepared rather than trying to do it at the very last minute. So I call having that corporate finance capital markets fluency in the organization is helpful.

STEVEN FAULKNER: Yeah. And when I think about this. I always think there's three buckets of readiness. There's the business readiness. And I've just heard both of you really talk about that a lot signifying the importance. There's the shareholder readiness. And to me, what that means is businessmen are saying, oh, I didn't know or I didn't realize there are tax mitigation strategies, but they take time.

And so backing up, so that you can make it from a net perspective, the most accretive and efficient, even if you're not worried about maximizing your personal wealth, it gives you more wealth for your kids, for philanthropy. The other is it goes to it goes to taxes.

And then the last one is market readiness. But we can't necessarily impact that. But what we can do is if the business is ready, the shareholder base is ready, when the market is ready, now you can go. I want to pivot now and take a moment and think about, what are your insights for business owners and operators caught in a revolutionary cycle of artificial intelligence, technology change, and cyber risk? Melissa, maybe I'll start with you.

MELISSA SMITH: Sure. So I think, first of all, as you think about the company preparing for a sale, clearly there is a focus from buyers and diligence around how the company is utilizing AI today. And is there a real kind of ROI on any investments that company is making. So I think that's kind of a basic fact today's environment.

For us, as we think about how many of these companies are utilizing AI today in their overall financial operations. It really comes down to automating existing manual processes, providing more valuable insights to the finance teams overall, while obviously, at same time keeping sort of controls intact. I think the highest use case from a treasury perspective is just improving, again, kind of that daily cash flow forecasting, reconciliation and exception handling, invoice capturing, fraud detection and prevention, obviously. And that's something that we spend a lot of time on our side in helping with covenant compliance monitoring.

So that's just some of the use cases of how companies are again, trying to automate some of these manual processes. One of the things though, that we spend a ton of time helping companies think through is have they done the work up front to what I would call their data infrastructure to actually be able to leverage AI.

And I think the smaller size the company is, the less likely that they may have done the work for the last decade or five years or whatever the time frame to again have the data available and ready in order to put that AI layer on top of it. So that's where we spend, again, a bunch of time with companies thinking through that.

STEVEN FAULKNER: Yeah, that's helpful. And Michael, from the perspective of perhaps like a sell side engagement, how do you think about adoption of AI, technology, and then the flip side, the cyber risk of the business?

MICHAEL FLYNN: Yeah, I think AI has become a very important point of diligence for every transaction these days. And it's on two fronts. One, as Melissa said, what has the company done to adopt AI, perhaps to better their business, or what is the opportunity to better your business through AI. And what a seller wants to demonstrate is that there is a plan for AI, and there are real case, like case studies in terms of how you're adopting it and how you're bettering your business.

AI is thrown out there in many instances as being a solve, can solve all problems. But you really what sellers are looking for is a return real use cases, not what we call AI theater in terms of we're doing all of the following things. So be really specific as to what you're doing within your business and how you're using AI to better the business.

On the other front, in terms of does what buyers are very much looking for is, does AI present a risk to the business and a risk to the business model? And I would say buyers are very, very much looking at that side of the equation as well to ensure that AI doesn't present a real risk in terms of destroying value for that particular business or that business model.

STEVEN FAULKNER: Yeah. I think it's so important today, I'm fortunate to sit on the board of a multinational company and I'm reminded, my kids were very active in sports and athletics growing up. And I'm reminded of those early days with the youth coaches who would yell out on the field, don't run to where the ball is, run to where the ball's going. And I've kind of adopted that when I'm in my board meetings thinking about, well, it's great, this is where we are, but where are we going. Where's the industry going? How are we going to be prepared? How are we going to be protected to preserve franchise value?

I want to change this up. Make it a little bit more personal now. Michael, I'll ask you to go first. Like tell me something you're listening to or you're reading right now. It can be business related. It can be pleasure. But just so I can have a better insight into what you do in your off time.

(DESCRIPTION)

The three panelists smile.

(SPEECH)

MICHAEL FLYNN: Well, I tend to take the weekends to catch up on my business reading actually, so there's not a lot of books and/or fiction that I take in, but I like to take the weekends to catch up on particular businesses, business or management teams in terms of how they're transforming their businesses. The other thing I really enjoy is reading a lot of thematic research over the weekends and taking in terms of as you said, in terms of where's the ball going. So a lot of that type of insights.

STEVEN FAULKNER: Yeah. Melissa, how about you?

MELISSA SMITH: So I do try to get a little bit away from the business reading when I can, when I have some time, and I like to alternate between fiction and non-fiction. Right now I'm on the nonfiction I'm reading a book called-- but now I'm trying to remember who it's by. It's called The Death of Expertise, which is about with obviously just the proliferation of social media and everybody having an opinion, the fact that society relies less and less on experts in the field and implications as a whole. So it's an interesting if not somewhat depressing read.

DESCRIPTION)

Melissa grins.

(SPEECH)

STEVEN FAULKNER: I may need to read that one, because I think it is timely. Not that I want to be depressed.

LAUGHTER]

So I'm going to offer an oldie but a goodie. It's called Mcllhenney's Gold. And it's about, just one of the success stories in the United States. It's a multi-generational family with an iconic brand, Tabasco sauce. And they've been manufacturing things since, I think, the late 1860s. So just after the Civil War.

And I'm revisiting it, because I draw a little inspiration when I talk to multi-generational business owners around, here's the success that you can put in place. Here are the pitfalls that you want to avoid. So I guess unfortunately, like Michael, I'm not straying too far from my day job, but I find it entertaining.

Thank you for joining today's discussion, preparing for what's ahead, a strategic framework for business owners. I'd like to thank my colleagues, Melissa Smith and Michael Flynn for engaging in a lively and informative conversation. From all of us at JP Morgan, we look forward to hearing your comments and earning an opportunity to work with each of you. Thank you.

NARRATOR:

(DESCRIPTION)

Logo: J.P. Morgan. Key Risks: This material is for information purposes only, and may inform you of certain products and services offered by private banking businesses, part of JPMorgan Chase & Co. ("JPM"). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. If you are a person with a disability and need additional support accessing this material, please contact your J.P. Morgan team or email us at accessibility.support at j p morgan.com for assistance. Please read all Important Information. General Risks and Considerations: Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g. equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan team.

(SPEECH)

Thank you for joining us. Prior to making financial or investment decisions you should speak with a qualified professional in your JP Morgan team.

(DESCRIPTION)

Non-Reliance: Certain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/ reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events. Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.

(SPEECH)

This concludes today's webcast. You may now disconnect.

[MUSIC PLAYING]

(DESCRIPTION)

Your Investments and Potential Conflicts of Interest: Conflicts of interest will arise whenever JPMorgan Chase Bank, N.A. or any of its affiliates (together, "J.P. Morgan") have an actual or perceived economic or other incentive in its management of our clients' portfolios to act in a way that benefits J.P. Morgan. Conflicts will result, for example (to the extent the following activities are permitted in your account): (1) when J.P. Morgan invests in an investment product, such as a mutual fund, structured product separately managed account or hedge fund issued or managed by JPMorgan Chase Bank, N.A. or an affiliate, such as J.P. Morgan Investment Management Inc.: (2) when a J.P. Morgan entity obtains services, including trade execution and trade clearing, from an affiliate: (3) when J.P. Morgan receives payment as a result of purchasing an investment product for a client's account; or (4) when J.P. Morgan receives payment for providing services (including shareholder servicing recordkeeping or custody) with respect to investment products purchased for a client's portfolio. Other conflicts will result because of relationships that J.P. Morgan has with other clients or when J.P. Morgan acts for its own account. Investment strategies are selected from both J.P. Morgan and third-party asset managers and are subject to a review process by our manager research teams. From this pool of strategies, our portfolio construction teams select those strategies we believe fit our asset allocation goals and forward-looking views in order to meet the portfolio's investment objective. As a general matter, we prefer J.P. Morgan managed strategies. We expect the proportion of J.P. Morgan managed strategies will be high (in fact, up to 100 percent) in strategies such as, for example, cash and high-quality fixed income, subject to applicable law and any account-specific considerations.

While our internally managed strategies generally align well with our forward-looking views, and we are familiar with the investment processes as well as the risk and compliance philosophy of the firm, it is important to note that J.P. Morgan receives more overall fees when internally managed strategies are included. We offer the option of choosing to exclude J.P. Morgan managed strategies (other than cash and liquidity products) in certain portfolios. The Six Circles Funds are U.S.-registered mutual funds managed by J.P. Morgan and sub-advised by third parties. Although considered internally managed strategies, JPMC does not retain a fee for fund management or other fund services. Legal Entity, Brand and Regulatory Information: In the United States, bank deposit accounts and related services, such as checking savings and bank lending, are offered by JPMorgan Chase Bank, N.A. Member FDIC. JPMorgan Chase Bank, N.A. and its affiliates (collectively "JPMCB") offer investment products, which may include bank managed investment accounts and custody. as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC ("JPMS"), a member of FINRA and S I P C. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. JPMCB, JPMS and CIA are affiliated companies under the common control of JPM. Products not available in all states.

In Germany, this material is issued by J.P. Morgan SE, with its registered office at Taunustor 1 (Taunus Turm). 6 0 3 1 0 Frankfurt am Main, Germany, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht BaFin and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB). In Luxembourg this material is issued by J.P. Morgan SE - Luxembourg Branch, with registered office at European Bank and Business Centre, 6 route de Treves, L 2 6 3 3, Senningerberg. Luxembourg, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht BaFin and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE - Luxembourg Branch is also supervised by the Commission de Surveillance du Secteur Financier (CSSF); registered under R.C.S Luxembourg 8 2 5 5 9 3 8 in the United Kingdom, this material is issued by J.P. Morgan SE London Branch, registered office at 25 Bank Street, Canary Wharf, London E14 5JP, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht BaFin and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB): J.P. Morgan SE London Branch is also supervised by the Financial Conduct Authority and Prudential Regulation Authority. In Spain, this material is distributed by J.P. Morgan SE, Sucursal en Espana, with registered office at Paseo de la Casteliana 31, 2 8 0 4 6 Madrid, Spain, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht BaFin and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB): J.P. Morgan SE, Sucursal en Espana is also supervised by the Spanish Securities Market Commission (CNMV): registered with Bank of Spain as a branch of J.P. Morgan SE under code 1 5 6 7. In Italy, this material is distributed by J.P. Morgan SE Milan Branch, with its registered office at Via Cordusio, n 3 Milan 2 0 1 2 3, Italy, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht BaFin and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE Milan Branch is also supervised by Bank of Italy and the Commissione Nazionale per le Società e la Borsa (CONSOB): registered with Bank of Italy as a branch of J.P. Morgan SE under code 8 0 7 6; Milan Chamber of Commerce Registered Number: R E A M I 2 5 3 6 3 2 5.

In the Netherlands, this material is distributed by J.P. Morgan SE Amsterdam Branch, with registered office at World Trade Centre, Tower B, Strawinskylaan 1 1 3 5, 1 0 7 7 XX, Amsterdam, The Netherlands, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht BaFin and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB): J.P. Morgan SE - Amsterdam Branch is also supervised by De Nederlandsche Bank (DNB) and the Autorited Financiele Markten (AFM) in the Netherlands Registered with the Kamer van Koophandel as a branch of J.P. Morgan SE under registration number 7 2 6 1 0 2 2 0.

In Denmark, this material is distributed by J.P. Morgan SE - Copenhagen Branch, filial at J.P. Morgan SE, Tyskland, with registered office at Kalvebod Brygge 39 dash 41, 1 5 6 0 Kabenhavn V. Denmark, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht BaFin and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB): J.P. Morgan SE Copenhagen Branch, filial at J.P. Morgan SE, Tyskland is also supervised by Finanstilsynet (Danish FSA) and is registered with Finanstilsynet as a branch of J.P. Morgan SE under code 2 9 0 1 0. In Sweden, this material is distributed by J.P. Morgan SE Stockholm Bankfilial, with registered office at Hamngatan 15, Stockholm, 1 1 1 4 7, Sweden, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht BaFin and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB): J.P. Morgan SE Stockholm Bankfilial is also supervised by Finansinspektionen (Swedish FSA); registered with Finansinspektionen as a branch of J.P. Morgan SE. In Belgium, this material is distributed by J.P. Morgan SE - Brussels Branch with registered office at 35 Boulevard du Régent, 1000, Brussels, Belgium, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht BaFin and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE Brussels Branch is also supervised by the National Bank of Belgium (NBB) and the Financial Services and Markets Authority (FSMA) in Belgium; registered with the NBB under registration number 0 7 1 5 6 2 2 8 4 4. In Greece this material is distributed by J.P. Morgan SE - Athens Branch, with its registered office at 3 Haritos Street, Athens, 1 0 6 7 5, Greece, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht BaFin and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB) J.P. Morgan SE - Athens Branch is also supervised by Bank of Greece: registered with Bank of Greece as a branch of J.P. Morgan SE under code 124; Athens Chamber of Commerce Registered Number 1 5 8 8 8 3 7 6 0 0 0 1; VAT Number 9 9 6 7 6 5 7 7. In France, this material is distributed by JPMorgan Chase Bank, N.A. Paris Branch, registered office at 14. Place Vendome, Paris 7 5 0 0 1, France, registered at the Registry of the Commercial Court of Paris under number 7 1 2 0 4 1 3 3 4 and.

This communication is an advertisement for the purposes of the Markets in Financial instruments Directive (MIFID II) and the Swiss Financial Services Act (FINSA). Investors should not subscribe for or purchase any financial instruments referred to in this advertisement except on the basis of information contained in any applicable legal documentation, which is or shall be made available in the relevant jurisdictions (as required). In Hong Kong. this material is distributed by JPMCB, Hong Kong branch. JPMCB, Hong Kong branch is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission of Hong Kong. In Hong Kong, we will cease to use your personal data for our marketing purposes without charge if you so request.

In Singapore, this material is distributed by JPMCB, Singapore branch JPMCB, Singapore branch is regulated by the Monetary Authority of Singapore. Dealing and advisory services and discretionary investment management services are provided to you by JPMCB, Hong Kong/Singapore branch (as notified to you). Banking and custody services are provided to you by JPMCB Singapore Branch. The contents of this document have not been reviewed by any regulatory authority in Hong Kong, Singapore or any other jurisdictions. You are advised to exercise caution in relation to this document. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. For materials which constitute product advertisement under the Securities and Futures Act and the Financial Advisers Act, this advertisement has not been reviewed by the Monetary Authority of Singapore. JPMorgan Chase Bank, N.A., a national banking association chartered under the laws of the United States, and as a body corporate, its shareholder's liability is limited. With respect to countries in Latin America the distribution of this material may be restricted in certain jurisdictions. We may offer and/or sell to you securities or other financial instruments which may not be registered under, and are not the subject of a public offering under, the securities or other financial regulatory laws of your home country. Such securities or instruments are offered and/or sold to you on a private basis only. Any communication by us to you regarding such securities or instruments, including without limitation the delivery of a prospectus, term sheet or other offering document, is not intended by us as an offer to sell or a solicitation of an offer to buy any securities or instruments in any jurisdiction in which such an offer or a solicitation is unlawful. Furthermore, such securities or instruments may be subject to certain regulatory and/or contractual restrictions on subsequent transfer by you, and you are solely responsible for ascertaining and complying with such restrictions. To the extent this content makes reference to a fund, the Fund may not be publicly offered in any Latin American country, without previous registration of such fund's securities in compliance with the laws of the corresponding jurisdiction.

JPMorgan Chase Bank, N.A. (J P M C B N A) (ABN 4 3 0 7 4 1 1 2 0 1 1/A F S Licence No: 2 3 8 3 6 7) is regulated by the Australian Securities and Investment Commission and the Australian Prudential Regulation Authority. Material provided by J P M C B N A in Australia is to "wholesale clients" only. For the purposes of this paragraph the term "wholesale client" has the meaning given in section 761G of the Corporations Act 2001 (C t h). Please inform us if you are not a Wholesale Client now or if you cease to be a Wholesale Client at any time in the future. JPMS is a registered foreign company (overseas) (ARBN 1 0 9 2 9 3 6 1 0) incorporated in Delaware, U.S.A. Under Australian financial services licensing requirements, carrying on a financial services business in Australia requires a financial service provider, such as J.P. Morgan Securities LLC (J P M S), to hold an Australian Financial Services License (AFSL), unless an exemption applies. J P M S is exempt from the requirement to hold an A F S L under the Corporations Act 2001 (C t h) (Act) in respect of financial services It provides to you, and is regulated by the SEC, FINRA and CFTC under US laws, which differ from Australian laws. Material provided by J P M S in Australia is to "wholesale clients" only. The information provided in this material is not intended to be, and must not be, distributed or passed on, directly or indirectly, to any other class of persons in Australia. For the purposes of this paragraph the term "wholesale client" has the meaning given in section 761G of the Act. Please inform us immediately if you are not a Wholesale Client now or if you cease to be a Wholesale Client at any time in the future. This material has not been prepared specifically for Australian investors. It: may contain references to dollar amounts which are not Australian dollars; may contain financial information which is not prepared in accordance with Australian law or practices; may not address risks associated with investment in foreign currency denominated investments; and does not address Australian tax issues.

References to "J.P. Morgan" are to JPM, its subsidiaries and affiliates worldwide. 'J.P. Morgan Private Bank" is the brand name for the private banking business conducted by JPM. This material is intended for your personal use and should not be circulated to or used by any other person, or duplicated for non-personal use, without our permission. If you have any questions or no longer wish to receive these communications, please contact your J.P. Morgan team. Copyright J.P. Morgan Chase & Co. All rights reserved.

Logo: J.P. Morgan.