Equity Deal Activity Soars, Banks Bet on Continued Boom
The equity deal market is on fire, and Wall Street’s biggest banks are confident that the trend will continue through 2025. After a remarkable surge in underwriting revenue last quarter, industry heavyweights like Morgan Stanley, Goldman Sachs, and Citigroup are bullish on deal flow.
Regulatory Relief Expected to Fuel Growth
Chief executive officers believe that the White House’s easing of regulations will spur greater activity in the market. Denis Coleman, Goldman Sachs’ chief financial officer, notes that reduced regulatory burden will serve as a tailwind to risk assets and capital deployment. This optimism is shared by Ted Pick, Morgan Stanley’s chairman and CEO, who sees public listings as a “real option” for companies.
IPO Market Sees Significant Uptick
The numbers are impressive: IPOs raised $54.2 billion during the fourth quarter, a 94% increase year-over-year. Annual IPO volume rose to $145.7 billion in 2024, a 6.9% increase versus the previous year. Notable fourth-quarter IPOs include Hyundai Motor India, Tokyo Metro, and Talabat Holding.
Resilient Economy and Robust Earnings Drive Growth
The surge in volume can be attributed to a resilient US economy and robust corporate earnings, along with optimism about lower borrowing costs as the Federal Reserve began its interest-rate cutting cycle. However, bankers are also aware of potential turbulence from Washington as the White House’s policy agenda takes shape.
Tariffs and Trade Policy Pose Risks
The start of Trump’s second term has brought a flurry of executive orders, including the threat of 25% tariffs on goods from Mexico and Canada. While US stocks have extended their gains, any disruption in risk appetite in equity markets could impact IPO volumes, according to Walter Todd, president and chief investment officer at Greenwood Capital Associates.
Banks Prepare for a Busy 2025
Despite potential headwinds, banks are gearing up for a busy 2025. With the IPO market showing no signs of slowing down, industry leaders are confident that deal activity will continue to boom. As the regulatory landscape evolves, one thing is clear: Wall Street’s biggest banks are betting big on equity deal activity in the year ahead.
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