Dec 6, 2023

NEW YORK: Global bank executives said that dealmaking conditions have begun to improve, with some predicting a better outlook for strategic mergers and acquisitions at an industry event on Tuesday (Dec 5). Both M&A activity and initial public offerings (IPO) faltered last year after Russia’s invasion of Ukraine and the US Federal Reserve's aggressive rate hikes to tame inflation. “The M&A deals are coming a little faster,” Bank of America CEO Brian Moynihan told the Goldman Sachs US Financial Services Conference on Tuesday. Moynihan said that as the interest rate environment stabilises, there would be more scope for dealmaking. Goldman Sachs chief financial officer Denis Coleman said a lot of clients had an appetite and interest in “doing something strategic”, but he cautioned that sponsors or private equity firms are cautious due to the higher cost of capital. The capital markets environment has improved recently, which encouraged large listings in the United States including the listing of Arm Holdings. On the deals front, Goldman Sachs was among the advisers to Pioneer Natural Resources, which agreed to sell itself to ExxonMobil in a US$60 billion (RM279.8 billion) deal. In a recent transaction, US health insurer Cigna is in talks to merge with Humana, a source familiar with the matter told Reuters, a deal that could exceed US$60 billion in value and would be certain to attract fierce antitrust scrutiny. “Our dialog has never been stronger, conversations and pitches are happening,” Truist Financial CEO Bill Rogers said. Moynihan said BofA will outperform the industry on investment banking fees in the current quarter. “We’ll be at about US$1 billion in fees this quarter,” reflecting a low single-digit decline that “outperforms the industry”. The industry-wide investment banking fee pool is expected to drop by 10% to 15%, he said. Independent investment bank Evercore is also optimistic about the outlook for deals. “There is no question that activity levels are high in our firm. But the announcements will depend on market stability and confidence levels, no board wants to announce a deal and get the stock crushed,” Evercore chairman and CEO John Weinberg said. Meanwhile, trading in equities and fixed income, currencies and commodities is on track to be flat on an annual basis, Goldman’s Coleman said. Goldman Sachs expects compensation expenses to rise by a low to mid single-digit percentage this year, a spokesperson said. This reflected the performance of its core businesses, Coleman said. Goldman bosses are considering bigger bonuses to retain star traders and dealmakers this year as the bank looks to win over some who were disappointed by smaller payments in 2022, Reuters reported last month, citing sources familiar with matter. – Reuters Clickable Image