In a year when M&A volumes hit a record high, Goldman Sachs extended its market-leading share in global advisory by more than a full percentage point. As well as dominating the global league tables, it also led in the biggest regions, namely the US and Europe, just trailing behind JPMorgan in Asia.
For the 12 months to the end of the March 2022, Goldman emerged with a 30.72% share of global M&A volume, ahead of second-placed JPMorgan with 28.37%, according to Dealogic. In the previous 12 months, Goldman had a 29.52% share of the global market, ahead of second-placed Morgan Stanley with 26.17%.
As the pie grew larger, Goldman took a bigger slice.
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Part of the reason is that the firm has for several years now been chasing mid-market business from companies with annual revenues of $1 billion to $4 billion. That is a different approach to traditional rival Morgan Stanley, which sticks to the biggest strategic deals for the largest corporate clients.
The record volumes in 2021 were driven by mid-size M&A more than by megadeals of $20 billion or more.
“We did around 600 transactions last year with values above $500 million,” Stephan Feldgoise, co-head of global M&A at Goldman, tells Euromoney. “That is an all-time record.”
He adds that one of the benefits for the firm and its clients is that “by the time GS bankers become managing directors, as vice-presidents and associates they will have tremendous deal experience from working on many sizeable and complex transactions”.
However, Feldgoise still does his best to appear unhappy.
“We start from the view that we as a firm should be in every transaction,” he says. “Our goal is 100% market share. That is what drives us. And while we celebrate our transaction wins, we also carefully scrutinize our misses.”
Goldman also carefully analyzes how much more clients pay it compared with average fee levels across the industry. Euromoney looks into this too and finds a longer lead in advisory revenues than in the volume league tables.
In the last four full quarters, Goldman earned $5.7 billion from advisory, 26% more than JPMorgan with $4.5 billion, 42% more than Morgan Stanley with $4 billion and almost double fourth-placed Evercore’s $2.9 billion.
“Clients would not hire us and compensate us more if they were not getting value,” says Feldgoise. “That is also very true with private equity firms, who are such efficient and knowledgeable buyers of financial services and who have attracted such a quantum of capital that they now account for around 30% of the M&A fee pool.”
Goldman has a big coverage effort around private equity sponsors and their portfolio companies. In 2022, for the year to the second week of June, private equity accounted for 37% of global M&A volumes. That compares with an average of around 25% in the years before Covid.
One transaction highlight of this review period was the leveraged buyout of Medline, which valued the Chicago-based maker of medical supplies at $34 billion and was financed by the biggest leveraged finance deal since the great financial crisis, raising $14.77 billion.
Goldman was lead adviser to the company.
“This was much more than a sell-side M&A mandate,” says Feldgoise. “It also involved helping the Mills family, which had built the business over decades, on a critical transition in their ownership.”
One senses the famous Goldman network effect in operation behind the scenes here. The firm identifies several thousand key decision-makers – political leaders, business leaders and financial leaders – around the world and ensures someone at Goldman connects with them frequently.
We start from the view that we as a firm should be in every transaction
Stephan Feldgoise
The Medline deal brings a big flow of capital to the Mills family. As well as managing the business, family members now have to manage that. No doubt Goldman has some advice.
And the transaction also involved financing some of the firm’s biggest private equity clients. The acquiring consortium was led by Blackstone, Carlyle and Hellman & Friedman. Goldman led on the unsecured portion of the bridge loan.
Another highlight was the firm’s work in advising Canadian Pacific on the long-running contest to acquire Kansas City Southern, in what may be one of the last great railroad mergers. It will connect one line carrying freight from Mexico across the US and into Canada. It was a bidding war made complex by the influence of the US rail regulator, the US Surface Transportation Board.
Canadian Pacific saw its initial bid of $29 billion accepted, then topped by a $34 billion competing offer from Canadian National, which then hit regulatory hurdles. Nervous that the higher offer was less likely to win approval, Kansas City Southern turned back to Canadian Pacific, which won with a $31 billion offer – higher than its first bid but lower than the competing one.
“This was a highly complex, public transaction that showed Goldman Sachs at its best,” says Feldgoise. “It pulled together country teams, industry teams, financing as well as M&A expertise to judge the right tactics for what is always the client’s key question: ‘How do I win?’”
