The outlook for global deal-making

How will geopolitics, tariffs, and generative AI affect the global deal making environment in 2025? I'm Alison Nathan, and this is Goldman Sachs Exchanges. To help explain the state of deals and the road ahead, I'm joined again by Stefan Feldgoyse and Mark Sorrell, the co heads of the global mergers and acquisitions business in Goldman Sachs's global banking and markets division. Stefan is joining me here in the New York studio, and Mark is joining us remotely from London. Mark, Stefan, welcome back to the program. Pleasure to be sitting down with both of you again. Great

to be back. Thank you. Thanks, Alison. Stefan,

when we sat down a year ago, the m and a market was beginning to show signs of life, and I say that pretty hesitantly because activity was still pretty subdued. But this year, inflation has continued to moderate. We have seen the long anticipated rate cutting cycle of the Fed finally begin, and, of course, the S and P 500 is making new highs, I would say, almost daily, making new highs. So putting all of that together, how has that helped spur deal making activity this year? What have you observed in terms of how deal making activity has evolved over the course of 2024? It's

interesting. If you roll back to when we were together a year ago, we had a view that 2024 was gonna be somewhere in the range of a plus 10% year relative to 2023. And in fact, that's largely what it's been, but it certainly has been what I'll call as a gradual crescendo of factors that have really driven what I'll call a plus 10% year. And, oh, by the way, as we look to 25, which we'll talk about, we are balanced and have a similar view in terms of 25 over 24. But you saw strategic activity. Again, the imperative coming out of COVID to reposition remained as interest rates came down, as press

Let's unpack some of those factors because, as you mentioned, the rate environment has been a big driver of deal activity. The Fed has started cutting rates, but rates themselves, if you look at the 10 year, it's been pretty resilient. We're back up well above 4%. So when you think about how corporates are viewing the rate environment today, is it better than it was in the last year?

It's modestly better, but we have to remember the world got used to free money for well over a decade since the financial crisis. And if you look at the level of absolute rates now, it's still relatively low if you look over 30 years or 40 years or 50 years. Right. But that takes some psychological adjustment because people were used to, particularly financial sponsors who were the biggest beneficiaries of effectively and extraordinarily low cost of capital that we saw after the financial crisis. So as people have adjusted their models and have understood that this is the, quote, new normal, y

the other big driver when I think back to our conversation last year was the uncertainty. We did have an impending US election and other elections as you rightly pointed out that could lead to material policy changes. If we think about the various policy shifts that the market is focusing on right now when it comes to tariffs, when it comes to geopolitical risks, when it comes to perhaps a little less regulatory scrutiny, how How do you think that's all going to come together to impact deal making activity this year? So

we think in decades in our business. And by the way, corporates and you've seen it largely in the markets when people were surprised that the markets weren't reacting or overreacting to any specific risk or short term issue that came up. Boards think in decades. And so every administ