In tough markets, changes in banks’ market share can be particularly telling. Mergers and acquisitions had another down year in 2023, with total volume falling to $3.13 trillion, from $4.3 trillion in 2022, when rates first started rising, and $5.7 trillion in the post-Covid boom of 2021.
But some things don’t change. Goldman Sachs retains its normal position at the top of the global advisory league tables by both M&A revenue and M&A volume. It was top ranked in the biggest M&A market of all, the US, in 2023 with a 13.8% share of revenue, comfortably ahead of JPMorgan with 11.2% and almost twice as much as Morgan Stanley in third place with 7.4%. Goldman was also top in Asia Pacific ex-Japan, while JPMorgan nudged it into second place in Europe.
“Our league table lead has expanded in the last couple of years, as the market drivers have changed,” says Avinash Mehrotra, co-head of Americas M&A at Goldman. “We are now into a corporate led M&A recovery, with more activity in the old economy sectors of industrials and natural resources after a busy time in technology.”
Shortlisted
- JPMorgan
- Morgan Stanley
Sponsors are still important but not at the same level as in 2021, when they accounted for 40% of activity. That is now down to 20% to 25%.
“Activism remains an accelerant of corporate M&A,” Mehrotra adds. “There has been a move to stock deals rather than cash consideration. And there is a big de-conglomeration theme, with companies separating off divisions and concentrating on core businesses. We have been a lead adviser in many of the most important spin offs and split offs.”
The firm advised Johnson & Johnson on the separation of its consumer brand Kenvue in a multi-step process than began with a $4.4 billion IPO in May 2023 and then a much bigger exchange offer that allowed J&J shareholders to exchange shares in the parent company for stock in Kenvue.
Those deals took J&J’s ownership down from 90% of Kenvue to just under 10%.
Goldman had been advising on this for over four years.
“The strategic decision was to simplify J&J and to concentrate on pharmaceuticals and medtech rather than the consumer business,” says Dusty Philip, co-chair of global M&A. “The tactical decision was to do a split off rather than a spin to shareholders, given that J&J has a big following among healthcare specialists that may not have wanted to own a consumer brand.”
He sees it as an exemplary transaction.
“When the cost of capital is zero, you can own a lot of businesses. Over half the S&P500 are still in three or more major businesses. But when the cost of capital goes up, companies have to be more discerning, especially if each of those businesses requires investment or balance-sheet optimization.”
In the run up to the IPO, Goldman was active bookrunner on a $9 billion debt financing for the company.
“It’s hard to separate strategic advice from financing. That’s why you need a full-service bank,” says Philip.
Our league table lead has expanded in the last couple of years, as the market drivers have changed
Avinash Mehrotra
The link between M&A advisory and the firm’s powerful equities business will come further to the fore if stock-based corporate M&A continues.
Another fascinating transaction announced last year was Chevron’s agreed all-stock offer for Hess. Goldman is lead adviser to Hess, a S&P500 company, still headed by John Hess, son of its founder Leon Hess.
Hess has repositioned as a pure-play oil and gas exploration and production company and moved away from downstream businesses. It has a much-coveted position in the offshore Stabroek block in the Guyana basin, which Chevron believes will provide it with good cash margins at lower carbon intensity, even while it appears to make the acquirer even oilier.
“Natural resources represented the greatest share of M&A volumes last year, including the two largest deals – Pioneer Natural Resources’ sale to ExxonMobil and Hess’s sale to Chevron,” says Brian Haufrect, co-head of Americas M&A.
“Both of these landmark transactions included 100% stock consideration. As the management teams and boards evaluated each transaction, it was critical to take a detailed, informed view of the stock they were receiving in the merger, the pro forma implications of each transaction and the equity market environment for the industry.”
Goldman also worked on some of the biggest deals in Europe. It advised Telecom Italia on the $23 billion sale of its landline grid to KKR.
“Infrastructure has been quite a resilient asset class, which is for a now a small percentage of sponsors’ allocation and one that is set to grow from that low base. And this was the standout transaction in Europe last year,” says Mark Sorrell, co-head of global mergers and acquisitions based in London.
The firm looks ahead with renewed confidence.
Stephan Feldgoise, co-head of mergers and acquisitions, says: “2023 was a stabilizing year for the market. We saw the return of mega M&A in the fourth quarter, and for 2024 we’re looking for more momentum to pick up in key sectors.”
