Goldman’s H1’19 M&A Advisory Fees Jump 20% To $1.7 Billion Even As Peers Report A Decline

by Trefis Team
Goldman Sachs
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Goldman Sachs (NYSE:GS) is a leading global financial services firm with offices in over 30 countries. It is a market leader in the global mergers & acquisitions (M&A) advisory space, and has maintained its leadership position (in terms of total M&A fees) for 33 consecutive quarters now. Trefis has analyzed trends in Goldman’s M&A advisory fees in an interactive dashboard, along with our expectation for the full year 2019. We have considered the 5 largest U.S Investment Banks (Goldman, JPMorgan, Citigroup, Morgan Stanley, and Bank of America) for this analysis.

Trefis estimates Goldman Sachs’ valuation to be $230 per share (15% more than the current market price) after incorporating changes based on Goldman Sachs’ earnings release last month. You can also see more Trefis data for financial companies here.

Goldman Sachs reported the highest M&A revenues for the first half of 2019 among all investment banks globally

  • Combined M&A revenue of the top-5 U.S. banks was $5 billion in the first half of 2019, which was at the same level as the year-ago period.
  • Goldman’s $1.7 billion in M&A revenues was substantially higher than the figure of $1.2 billion and $0.9 billion for its closest competitors JPMorgan and Morgan Stanley, respectively.
  • Goldman’s M&A revenues increased by 19.6% y-o-y in the first half of 2019, while JPMorgan & Morgan Stanley reported a decline of 2.7% and 23.5% respectively.

Goldman closed several high profile M&A deals in the first half of 2019

  • Goldman Sachs reported 176 completed M&A deals in the first half of 2019 (as per Refinitiv- Deal Logic report), which was the highest among its peers.
  • Although global M&A activity decreased in the first half of 2019, Goldman’s deal volume increased by 20.5% as compared to the year-ago period.
  • It was the lead banker on several high profile deals in 2019, including:
    • Tableau’s acquisition of Salesforce
    • Broadcom’s acquisition of Symantec’s Enterprise business

Big ticket deals coupled with a role in a higher number of deals boosted Goldman’s deal volume in the first half of 2019

  • It reported highest completed deal value of $552 billion among its peers, followed by JPMorgan and Morgan Stanley.
  • Although Global M&A deal volume decreased 4.8% y-o-y in the first half of 2019, Goldman recorded an increase of almost 100% in completed deals.

What to expect from Goldman Sachs’ M&A advisory revenues in 2019?

  • Goldman’s M&A advisory revenues are expected to be $3.5 billion in 2019, a marginal decrease from the figure for the previous year.
  • Additionally, we expect Goldman to retain its top spot in the M&A advisory space.
  • Combined M&A revenue of the top U.S investment banks would largely remain the same.

Per Trefis, Goldman Sachs’ Revenues (shows key revenue components) are expected to cross $35.4 billion in 2019 – leading to an EPS of $23.33 for the year. This EPS figure coupled with a P/E multiple of 10x, works out to a price estimate of $230 for Goldman Sachs’ stock (shows cash and valuation analysis), which is 15% higher than the current market price.

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