Stephan Feldgoise, co-head of global mergers and acquisitions at Goldman Sachs, shares insights on the accelerating pace of deal-making, particularly in energy and healthcare. He discusses how moderating inflation and rate cuts could boost activity by 10% in 2025. Feldgoise also highlights the importance of long-term strategies amid varying regional interests and the role of generative AI in shaping private equity investments. Despite ongoing risks, there's a growing optimism for large transactions as geopolitical obstacles lessen.
The recent resurgence in global deal-making is primarily driven by declining interest rates and a strategic need for companies to redefine their market presence post-COVID-19.
The pursuit of scale in mergers and acquisitions is critical across industries, emphasizing companies' efforts to enhance market presence and resource efficiency through strategic acquisitions.
Deep dives
Current Trends in Dealmaking Activity
In the evolving deal-making landscape, various factors such as inflation, interest rate adjustments, and market volatility are influencing corporate strategies for mergers and acquisitions (M&A). As interest rates have begun to decline, there has been a resurgence in deal-making, particularly noted in 2024, which showed an approximate 10% increase in activity compared to 2023. This resurgence is attributed to strategic repositioning demands in the aftermath of COVID-19, with companies increasingly looking to redefine their market presence. However, regulatory hurdles and geopolitical uncertainties also temper optimistic expectations, creating a balanced outlook for future deal-making activities.
The Role of Scale in Acquisition Strategies
Scale has emerged as a crucial factor driving M&A activities across various industries. Companies are increasingly pursuing growth through acquisitions to enhance their market presence and resource efficiency, prominently seen in sectors like energy, healthcare, and technology. Notably, large companies are keen on acquiring smaller firms to integrate innovative technologies and expand their offerings, which highlights the significance of scale as it relates to diversification and supply chain management. As businesses increasingly operate in volatile environments, the value of achieving scale—both geographically and product-wise—has become a strategic priority for boards and management.
Influences of Private Equity and Generative AI
Private equity activity, while currently below historical norms, is recovering with signs of increased capital deployment despite a challenging exit environment. Key to revitalizing this sector is the stabilizing IPO market, which allows sponsors greater options for monetizing their investments. Additionally, the rise of generative AI is poised to significantly impact deal-making, as industries adapt and seek to capitalize on advanced technologies, albeit with a focus on partnerships before large-scale acquisitions. As firms navigate the valuation complexities of AI ventures, this evolving landscape presents both opportunities and challenges for future M&A endeavors.
The pace of mergers and acquisitions around the world gained momentum this year, and there are signs that deal-making will accelerate in 2025, say Stephan Feldgoise and Mark Sorrell, the co-heads of the global mergers and acquisitions business in Goldman Sachs Global Banking & Markets, on Goldman Sachs Exchanges.
Date of recording: December 11, 2024
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