Goldman Dealmakers Optimistic About M&A in 2023

Global banking and markets heads at Goldman Sachs Group Inc. told Reuters in December that mergers and acquisitions (M&A) will recover in the second half of 2023.

Dan Dees, Jim Esposito, and other Goldman executives pointed to multiple reasons for deal activity to pick up. Large investors have amassed cash and are looking to fund transactions, and companies earning solid profits want to diversify. But both, the bankers said, are holding off until the climate seems more certain, according to Yahoo! Finance.

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Corporate clients want to gain new customers or new products, and they want to expand geographically, so when financing is available, they will likely make deals, according to Mark Sorrell, Global Co-Head of M&A.

In 2022, M&A values dropped 36% to $3.78 trillion, from $5.91 trillion in 2021, according to Dealogic. Banks slashed jobs as a result.

Now, as creditors have backed away from riskier loans for buyouts, companies are waiting.

"When the financing market comes back, we don't know when it will happen, but it will happen because of the amount of liquidity in the system, we think transaction volumes will and activity will recover," Sorrell told Reuters, saying it may be "quicker than people expect."

Goldman has been the top global M&A advisor by revenue for the past two decades, according to Dealogic, and its investment bankers will benefit should the markets have a resurgence. Despite its prominence, however, the investment banking division’s revenue accounted for just 13% of the bank’s third-quarter total in 2022. It reached 27% at the same time in 2021.

Also, Goldman is on track to cut thousands of employees in early 2023, having laid off 500 people in September. It also intends to trim bonuses.

Whether the leveraged loan market comes back to life after a quiet 2022 will also have a significant effect on how Wall Street dealmakers fare. Goldman executives are sounding positive.

"When you go through periods of volatility, you know it creates opportunity," Dees said.