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Goldman Sachs bankers are waiting for these rescuers

Goldman’s Q2 results day has come and gone and its M&A bankers are not having the best time. 

Goldman's M&A revenues were down 46% year-on-year in the second quarter and 37% year-on-year in the first half. It's not looking great (particularly given that Morgan Stanley's comparable revenues were down 24% and 29% over the same period), but Goldman Sachs' CEO David Solomon explained what it will take for Goldman M&A bankers' fortunes to rise. 

"A significant contributor to our M&A business is financial sponsors, and that's come to a halt," explained Solomon on Goldman's investor call. Financial sponsors (AKA private equity firms) aren't doing deals because of the "volatility of change in the environment," said Solomon. However, things will improve, he promised, although maybe not this quarter or the next. 

In the meantime, data from market intelligence firm Dealogic confirms the predicament. Financial sponsor deal volume so far this year was down significantly on 2022, both in terms of deal number and volume, measured in dollars – by 27% and 58% respectively. Those are huge numbers, of course. Compared to 2021, the fall is even more intense – 30% and 67%, respectively.

When will private equity’s dry powder (cash) get lit? It's a question that's also been troubling Morgan Stanley. Blackstone president Jon Gray said yesterday that a reduction in uncertainty around inflation and interest rates could make it easier for financial sponsors to engage in IPOs and M&A. However, Gray said this could be countered by the possibility of an economic slowdown. 

Goldman bankers may need to wait a bit longer yet. 

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AUTHORZeno Toulon

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