Corporate governance experts and portfolio managers tell me they’re a part of what’s next for a potential SpaceX-Tesla merger, which Musk himself backed during the company’s earnings call late Tuesday, saying the deal has “a lot of merit.”

SpaceX delivered a blowout quarter and its first profit as a public company earlier this week. But Musk, the CEO of both SpaceX and Tesla, gave Wall Street something else to digest: Independent directors at the companies have formed special committees to explore merging the two. The deal, at Wednesday’s market value, would create a roughly $3.5 trillion behemoth and mark the largest corporate tie-up in history.

Getting there, however, is not Musk’s decision alone. His massive stake in SpaceX and Tesla makes him, in his own words, a “conflicted party,” preventing him from being on either committee that are evaluating the deal. “It’s an odd kabuki dance where two groups of people are talking and I can’t be in the conversation,” Musk said. “This is definitely the kind of question where I feel like I’m tap dancing through a minefield.” 

Another hurdle: the shareholder vote to approve the merger. Musk controls about 85% of SpaceX’s voting power, compared with roughly 20% at Tesla. In order for the deal to move forward on the automaker’s side, Musk said it would require support from holders of the majority of all outstanding shares—not just a majority of the shares voted—a threshold he described as “quite a high hurdle.” Shares not voted would, in turn, have the same effect as votes against the merger. Rational Equity Armor Fund’s Luke Rahbari compared the process to “herding cats,” adding that “it’s going to take some time and money.” 

Winning over Tesla shareholders would also depend on the valuation and any premium offered, according to Nejat Seyhun, a finance professor at the University of Michigan Ross School of Business. “At a zero premium, probably there would be some resistance, but at 20%, 30% or 40% premium I don’t think there would be any,” he told Fortune. Tesla announced quarterly earnings late Wednesday, beating on the top and bottom line. Revenue fell from a year earlier, weighed down by some weakness in its core automotive business.

Both Rahbari and Seyhun expect the merger to happen eventually and believe it would benefit both companies. The potential payoff is greater efficiency. Combining SpaceX and Tesla could allow them to pool their engineers, technology and research budgets, eliminating overlapping spending, especially as both push further into artificial intelligence. “The lines are getting kind of muddled already,” Rahbari said, pointing to shared tech and data. One connection: Tesla already uses SpaceX’s Starlink at some of the company’s Supercharger stations. That’s the kind of partnership that Rahbari describes as already “beneficial for both companies.”

However, Musk has cautioned investors against treating a merger as inevitable. “Some people out there assume that a SpaceX and Tesla merger is a certainty, and I think that would be overstating it,” he told analysts on the earnings call. For now, investors seem optimistic about the merger’s prospects. SpaceX shares jumped nearly 8% on Wednesday, their best single-session performance since August. Tesla gained 3.4%.

See you tomorrow,

Morgan Chittum
X: @morgan_chittum
Email: morgan.chittum@fortune.com

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Joey Abrams curated the deals section of today’s newsletter.

VENTURE CAPITAL

- Flapping Airplanes, a San Francisco-based AI research company developing more data- and compute-efficient models, raised $1 billion in funding. Index Ventures and Lux Capital led the round and were joined by Sequoia Capital, GV, and Kleiner Perkins.

- Legora, a New York City and Stockholm, Sweden-based developer of AI software for legal professionals, raised $550 million in Series E funding. Atreides Management led the round and was joined by Baron Capital, Capital Group, Fidelity Management & Research Company, and others.

- Peak Energy, a Burlingame, Calif.-based developer of sodium-ion energy storage systems, raised $108 million in Series B funding. General Motors Ventures led the round and was joined by Maverick Silicon, Infinite Capital, Eclipse, Xora Innovation, and LG Technology Ventures.

- Blacksmith, a San Francisco-based provider of infrastructure for building and testing software code, raised $66 million in Series C funding. Sequoia Capital led and was joined by Premji Invest and existing investors Peak XV Partners, GV, and Y Combinator.

- Mach9, a San Francisco-based developer of AI-powered surveying and civil engineering software, raised $34 million in Series A funding. First Round Capital and Bessemer Venture Partners led the round and were joined by Prudence and existing investor Quiet Capital.

- Optivolt, a San Francisco-based developer of power electronics that improve solar panel performance, raised $32 million in Series A funding. VXI Capital led the round and was joined by RA Capital, Valo Ventures, and Atlas Innovate.

- CapitalOS, a San Francisco-based provider of embedded financial infrastructure for B2B platforms, raised $21.9 million in Series A funding. LGVP led the round and was joined by WEX Venture Capital, Group11, Great North Ventures, Night Capital, and existing investors.

- IMIO, a Chicago-based manufacturer of microbial products that improve soil health and crop performance, raised $12 million in funding. Sofinnova Partners led the round and was joined by Cultivate Next, Starshot Capital, Grow Together Salinas, Earth Foundry, and Serra Ventures.

- Photon Bridge, an Eindhoven, Netherlands-based developer of laser sources for optical connections in AI data centers, raised €10 million ($11.2 million) in funding. Amadeus APEX Technology Fund and 360 Capital led the round and were joined by existing investors Innovation Industries, Faber, and Brabant Development Agency.

- Pascal, a Watertown, Mass.-based developer of solid refrigerant cooling technology, raised $8.5 million in funding. Sazze Partners and LB Investment led the round and were joined by KDB Silicon Valley.

- Opply, a London-based developer of AI software for consumer packaged goods sourcing, procurement, and supply chain operations, raised $7.5 million in funding led by Chalfen Ventures and was joined by Index Ventures, Anthemis, Entrepreneurs First, In This Together, and Ventures Together.

PRIVATE EQUITY

- Aeromax Group, a portfolio company of Chimney Rock Equity Partners, acquired Loutech, a Chino, Calif.-based manufacturer of precision machined components for commercial and military aerospace markets. Financial terms weren’t disclosed.

- Granite Creek Capital Partners and Columbia Basin Partners acquired Matheson Industrial, a Pasco, Wash.-based provider of industrial coating and surface treatment services. Financial terms weren’t disclosed.

- Renovus Capital Partners acquired a majority stake in Aspire Home Health Care, a Morton Grove, Ill.-based provider of orthopedic and traditional home health services, including skilled nursing and therapy. Financial terms weren’t disclosed.

- Shrieve Chemical Company, a portfolio company of Gemspring Capital, acquired Research Solutions Group, a Pelham, Ala.-based distributor, blender, and recycler of industrial solvents and specialty chemicals. Financial terms weren’t disclosed.

FUNDS + FUNDS OF FUNDS

- FFL Partners, a San Francisco-based private equity firm, raised more than $1.35 billion for its sixth fund, which will target healthcare and tech-enabled services companies with equity investments of $50 million to $200 million.

- Inspired Capital, a New York-based venture capital firm, raised $450 million for its fourth fund, which will target pre-seed, seed, and Series A investments across sectors including AI infrastructure, healthcare, defense, fintech, robotics, and consumer.