M&A, IPO Boom Benefits Wall Street

A Record-Setting Year

Goldman Sachs (GS), Citigroup (C), and Jefferies (JEF) are among the Wall Street banks reaping big rewards from all the dealmaking going on in 2021. So far this year, companies have spent $1.8 trillion in the US and over $3.6 trillion globally on mergers and acquisitions. This year, M&A is expected to be higher than in 2015, which was a record-setting year.

That activity has translated into high advisory fees for Wall Street’s large banks and smaller shops. In the first six months of this year, leading dealmaker Goldman Sachs raked in over $1 billion in advisory fees for each of the past three quarters. The bank has topped that level only one other time in the past decade.

Business for Banks Expected to Heat Up

Bankers are poised to get even busier as summer comes to a close. Deal pipelines at many Wall Street firms hit record levels at the end of the second quarter as companies, PE firms, and SPACs flush with cash, hunting for deals.

The size of deals is also larger than in past M&A booms. Of the total volume, half came from deals of $1 billion to $10 billion in value. The Federal Trade Commission is swamped with deal filings. As a result, merger reviews are taking more time than the typical 30 days. Investors have been rewarding Wall Street bank stocks by sending shares higher. Goldman Sachs and Jefferies are up more than 40% so far this year.

IPO Enthusiasm Continues

It’s not just M&A deals putting money in the pockets of investment banks. Revenue from initial public offerings is also surging as a record number of companies go public. By the end of 2021, 100 companies are expected to join the 279 which already went public this year. 2021 is on pace to top the record setting number of debuts witnessed last year. Some of the well-known startups set to go public in the near future include Warby Parker, iFit, Allbirds, and Fresh Market.

With companies, SPACs, and PE firms sitting on cash they are looking to deploy, Wall Street has been a big beneficiary. These trends are expected to continue, at least for the remainder of the year.

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