Goldman Sachs Group Inc. GS continued to hold its position as the leading provider of merger advice for the seventh running year. Per data compiled by Bloomberg, Goldman advised on 235 mergers and acquisitions (M&A) announced in 2023 with an aggregate value of more than $671 billion.
With this, the bank had a 31% market share of the global merger advisory, surpassing JPMorgan Chase & Co. JPM. JPM was leading in merger advisory at the mid-point of 2023. Markedly, GS’s market share has increased against its largest rivals. In 2017, the bank had a 27% market share with a relatively high deal volume.
While Goldman’s lead over JPM narrowed from 2022, an increase in the overall market share is notable at a time when the industry is navigating through the dealmaking lull of 2023. In fact, global pending and completed transactions aggregated $2.16 trillion in 2023, down from 2021’s record of $3.8 trillion. It is also the lowest annual total since 2013. High interest rates and geopolitical tensions have kept deal makers on the sideline.
Nonetheless, with the central bank signaling an end to its hiking cycle, stabilization in interest rates is likely to improve M&A activity in 2024.
In fact, Citigroup C expects fourth-quarter 2023 investment banking (IB) revenues to rise in the high-single-digit range sequentially. Mark Mason, chief financial officer, said, “We have seen continued momentum, which is good, particularly in areas like debt capital markets and issuance activity there.”
As for GS, we believe that robust client engagement, backed by digital disruption and transformation trends, signs of growing M&A and underwriting pipelines, and the company’s decent IB backlog are expected to support investment banking (IB) revenues in the upcoming period. While we expect a 17.9% decline in 2023 IB fees, the same will increase 8.4% in 2024 and 6.3% in 2025.
Also, Goldman has decided to refocus its business on its core strengths of IB and trading, while scaling back consumer banking footprint. Hence, it undertook a major business restructuring initiative. In October 2023, the company entered an agreement with a consortium led by investment firm Sixth Street Partners to divest its consumer lending platform, GreenSky, and associated loans.
Goldman’s shares have gained 23.7% over the past three months compared with the industry’s 20.8% rise.
Image Source: Zacks Investment Research
GS presently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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