As economic forecasts grow more pessimistic, executives at the Wall Street firm – including Dan Dees and Jim Esposito, who jointly run its global banking and markets division – say they are poised for a recovery when equity markets funding to relax, possibly as early as the second half of 2023.
The projections come after the global value of mergers and acquisitions plunged 36% to $3.78 trillion in 2022, from a record $5.91 trillion in 2021, according to Dealogic data. Banks, including Goldman, have cut jobs in the face of the drop in activity.
In a series of interviews with Reuters in recent weeks, Goldman’s chief operating officers, who have each been with the firm for more than two decades, said there are many reasons for global business activity to pick up.
Big investors have lots of cash on hand to finance transactions, and big companies with strong profits want to diversify their businesses but are waiting for economic uncertainty to fade, bankers said.
“I’m still pretty bullish, maybe not in the first quarter, but going forward,” said Stephan Feldgoise, co-head of global mergers and acquisitions. Still, there are “clear hurdles in the early part” of 2023, he said.
Mark Sorrell, a colleague of Feldgoise’s in London, believes that corporate clients jump into business when funding is available because their underlying motives remain intact, such as new customer acquisition, new products or geographic expansion.
Companies are staying on the sidelines because their creditors have stopped making riskier loans for acquisitions as interest rates rise, but that could change quickly, he said.
“When the funding market comes back, we don’t know when it will happen, but given the amount of liquidity in the system, we think trading volume and activity will pick up,” Sorrell said.
The resurgence may be “quicker than people expect,” he said.