YouSaid · the spoken record

Mark Shapiro

lines on the record: 24
first: 2023-12-12
most recent: 2023-12-12
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“There's always many things that can derail confidence. Historically, election years have been down M&A markets. Obviously, there's a big election coming up in the United States. Geopolitical. Interest rate moves that none of us can predict that may be in response to substantial changes in inflation data one way or the other. So any of those things will impact confidence. And by far, and we've said it every year, and I'm sure it'll be true next year as well, CEO confidence in board confidence is the driver of M&A. M&A decisions are never 95-5. They're always difficult decisions based on expectations for the future and forecasts of synergies and opportunities and combinations that are difficult and hard to execute. And we never minimize integration. And once the deals are done, getting companies to work together and get put together always takes forward leading confidence. So interest rate moves, macro, pandemics, any of these things can derail confidence. That being said,”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“Of different ways to look at the corporate, the private equity activity we have, and see how the desire of our clients to push forward is shifting. What I would also highlight back to your first question to me is there's a huge impact of sentiment around the M&A business. So one of the things that I think has been interesting in the post-COVID period is how quickly activity can ramp up when conditions are conducive and when clients are in a risk-gone mode. And one of the things I find most interesting about pre-COVID versus today is I think today clients, when they see the window of opportunity to Stefan's point, really push forward because they know that window may not be there forever. And so what we're seeing when clients move risks on, activity ramps up very quickly. Clients push forward off the back of that other clients push forward and you can move quite quickly into an upswing of activity.”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“A business model, which is to deploy, to buy, and to exit, to sell. And I think with private equity, on the buying side, I think right now there is still some hesitation to deploy. And that is uncertainty about valuation that Stefan talked about. I think it is greater in certain sectors, particularly cyclical sectors. There's more uncertainty around valuation. I think on the sell side, I think what we're looking at is that private equity own assets of all sizes. I think my view of what will happen in the next 12 months is the first part of that market that will come back is on smaller and mid-sized assets. And then we will see larger and larger exits come through. And so what I'm looking at particularly on the private equity side of the business, I think, is the recovery in the ability for private equity to exit large portfolio assets, where they obviously hold very large single equity positions. So we have lots.”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“I would say Alison, if you think back to 12 months ago, what we saw when we first started to see a bit of a surge in corporate activity. We've been talking about in this session, we really saw across all sectors globally, corporate clients coming to us and saying we want to push forward and look seriously at buying specific targets and sizable targets. And so for me, the best measure of corporate sentiment that Stefan and I look at really carefully as we see all the activity that our clients are pursuing and when large corporate clients are calling us up saying we want to move on a meaningful size target, that is a really strong indication of how risk appetite is shifting and amongst our corporate client base. I think for private equity clients, it's a little bit different. I think for private equity clients, they obviously have”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“Should do it and not wait for the perfect time. There's never a perfect time, but there will be times that you can't do things. And so that forcing function of companies to seize opportunities when there are windows, when they can get things done, remains. So when you put those three factors together, we're not sitting here saying that's going to be necessary of the first quarter of 2024. And we think in long-term cycles in our business. I'm not smart enough to sit here and say, well, that's first quarter, second quarter, whatever it might be, but the underlying force and functions remain very strong.”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“I would say we're very balanced. I think Mark and I and Michael comment we're very balanced about it. What do I look at? I look at percentage of M&A of GDP, which is at probably last decade or two decades as a percentage of GDP, a record low level. And so low single digit percentages, when historically it's been closer to the mid-single digits, that's a fundamental driver. I look at the extraordinary amount of private capital, both to buy businesses, but also the number of portfolio companies that sit inside private equity companies who make money by transacting and doing transactions. I look at that as a forcing function. And the other, the third piece I would mention is that what we saw coming out of COVID was that the desire to do strategic repositioning, whether it's to do M&A to diversify supply chains or products or geographies, was extraordinarily strong. And what COVID showed us is that there will be windows when you can't get things done. And what boards said and what shareholders of companies have said is that if there's something that makes sense for you to do and there's a window to do it, you should”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“And obviously, a number of geopolitical events that we've seen have taken place closer to Europe than they have closer to the US. So I think for those reasons, I would say corporate sentiment outside the US is a little bit more risk-averse than in the US. But I think the underlying themes are the same. And my view is as we've seen in past cycles, the M&A cycle in Europe and in Asia will lag the US, but probably lag it by maybe six to nine months, not longer than that.”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“So I would say, Alison, that outside the US, we see very similar trends in the US in terms of what clients want to talk about and advance. I think what's different outside the US is I think a couple of things. First of all, that the macro picture is weaker in Europe in particular versus the US. So if you look at our own forecast for next year for growth, European growth, we expect to be meaningfully weaker than US growth. So the macro is not as favorable.”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“No doubt spinoffs have been very robust. Number of drivers, number one, activism continues. Boards have recognized if a simplification or a separation makes sense, either they can choose to proactively do it or if it is very stark and very clear, activists and their shareholders are going to push them to do it. So you've seen proactive portfolio simplification done by boards. The other thing is a spinoff is a singular decision. If a board decides that they want to spin a business off, you don't need a buyer. You don't need an IPO market. You're going to hand that to your shareholders. And so if the simplification makes sense, it is a unilateral decision of the company to execute that, and therefore they recognize the certainty is 100% because they're going to be able to execute it. And so that's why you've seen, again, a shift where you don't depend on a private equity universe to buy it. You don't necessarily depend on the successful IPO. You make a decision that simplification is the right thing to do, and this is the execution path that you pursue. And given that we're going to remain in not the most robust, but certainly hopefully more robust but challenging.”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“We also recently spoke to one of your colleagues, David Debner, about the trend toward corporate simplification and spin-offs and not really being a driver of M&A activity. Do you expect to see that type of activity continuing in 2024?”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“I would just add I agree that large transactions have actually been very resilient over the past year. They're quite concentrated or tend to be quite concentrated in certain sectors. Where have we seen less mega activity than before is in tech would be one place of note than previous cycles. I also think on the private equity side, the place we've seen resilience in large transactions is in public to private transactions. So private equity buying public companies. And this year we've seen record activity in that type of transaction and actually a good number of very large public to private transactions, both by traditional private equity and infrastructure funds. So I agree with Stefan is where we've seen certain transaction types, certain industries, it's really been resilient and I just think it shows that where clients want to move their portfolio.”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“Confidence return to some of the largest companies and the recognition and the benefits of scale, whether it be on capital structure, whether it be whether in the pandemic that the globe faced, are very clear. And so we've seen markets that have been supportive and conducive in some of these industries for some of the largest players, and that's why we've seen the return of large transactions.”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“We certainly have seen a resurgence in some of the largest transactions. And I think a lot of that has to do with the industries that we're talking about have extraordinarily large companies that have accumulated massive cash piles. When you think about pharmaceuticals coming out of COVID, you saw tremendous cash accumulation by companies. And the bottom line is that large pharma has always looked at startups and new companies as companies to acquire, to bring in new molecules, to bring in new compounds. And you've seen some new compounds in new areas, whether that be in cancer research or other areas that have tremendously valuable small companies. And so by definition, some of those are going to be very large transactions. The other is in energy. You saw the creation of some very large global energy companies and the accumulation, as we've seen, of what I call molecules and assets and scale has proven to be beneficial. And given just the sheer size of those companies, you've seen some very large transactions in energy. The other thing is that we've just seen”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“So there's a number of drivers. So, private equity just from a numerical perspective represented at the peak 35 to 40 percent of the M&A market. It's now much, much smaller. What will cause it to return? There are well over 1,000 substantial portfolio companies already in the portfolio as a private equity. So obviously private equity are not only buyers but sellers. The demands from their limited partners to return capital. And so the forcing function for them to sell assets is very high. I think there's a recognition in the interest rate environment that is higher for longer.”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“I do want to ask you about that a little bit more because we have seen a big change among the buyers and sellers involved in these transactions. Private equity in particular, which had been hugely active in M&A, has obviously become much less active. Stefan, you mentioned you think that may continue, but what could bring activity back in the private equity space?”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“That they view as attractive. And so you've seen large biotech and healthcare based MA expect that to continue. I will say technology is particularly interesting. The desire to execute and do things in technology, I'd say we've seen a rebound over the last several months, and we would expect to see a resumption in 24 of more technology M&A than relative to what we have seen, where there was a very substantial valuation shift. And industrials has really never seen a dip all the way from prior to 2020 through COVID until now, industrials continues to move along. Sponsors remains challenged across all industries. And that really is the cost of financing is just so much higher that the returns have been challenged. And therefore, you haven't seen the fingers meet on valuations. But sponsors remains challenged.”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“Hands down natural resources has been torid, and that has led to some of the largest transactions we've seen, particularly in energy. We define natural resources as energy, power, chemicals, and metals and mining, all very global other than power is more regional, but certainly energy chemicals and metals and mining, extremely global. Very high cash flow businesses and very much long macro demand growth. And so we have seen tremendous confidence in those companies. And we've also seen those companies recognize the benefits of scale. And so you've seen an accumulation of what I call the accumulation of molecules, whether that be an energy, whether that be in chemicals. And based on the dialogues we're seeing as well as the macro, we do not expect that to slow down. Healthcare also extraordinarily active. You have possibly the period in time with the greatest cash balances in capitalization of the large pharmaceutical companies around the world. You've also seen tremendous development of new molecules.”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“And Stephan, you mentioned some areas where we have seen a substantial amount of M&A activity. Talk to us a little bit more about which sectors have seen the most activity and which sectors you think will see more activity in 2024.”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“Agree with Stefan's comments. I think CEOs, whilst they have a number of challenges in their business dealing with inflation, margins, geopolitical risk, they are keen to advance their own strategic agenda. And I think that for the vast majority of our clients, they want to push forward with their strategic objectives, their portfolio moves, growing their businesses. Number one, I'd also say that I think as we move towards the end of this year, I think there is great consensus around what the macro outlook will be next year with inflation coming down and rates normalizing in the second half of next year along the lines of our own views. And I think that gives CEOs a little more confidence with which to plan their moves for next year. So I share Stefan's optimism and I think all through this year, from my own perspective, what's interesting all through this year is despite”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“Here it's taking longer because particularly in North America, we can talk about the global nature in a second, but particularly in North America, earnings, macroeconomic drivers, sales, customer demand has actually been quite good. Now, if that changes, we could lead to a different perspective because confidence is the number one driver of M&A. If the confidence in earnings and underlying performance falters, then you'll see a different timeline on the valuation paradigm. But right now it's taken longer for those reasons.”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“There's definitely other factors. And if you look at MA cycles over time, whenever there's been a material shift in fundamental value, whether that be technology valuations coming down, whether that be interest rates, and therefore the discount rates at which people think about cash flows, therefore lowing valuations happen, there's a psychological period of time where founders, owners, board members, management teams need to come to a realization of a new paradigm. And that takes time. And here it's particularly unique because we saw a move in interest rates while earnings and cash flows for companies remained quite strong. So many boards of directors would say, my company's performing, my shares are good, my earnings are good, my sales are good, why should I be worth less just because the Federal Reserve decided to raise interest rates? And so you actually have seen a more protracted period than typical, which is usually a six to nine month realization period, as I'll call it, to when people recognize a new valuation paradigm.”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“Are still challenged in terms of do boards have views where values meet where buyers are? And that's why I think we remain with the challenged M&A market. That being said, the level of dialogue, the level of activity, and we've seen some very large transactions, particularly in and around energy and related sectors over the last couple months, the level of dialogue is that the levels we saw, frankly, in 2021 and the first half of 2022, which were the most active M&A markets in history, has not realized yet in the number of transactions, but the dialogue remains extremely robust right now.”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“Been interesting, it feels since Mark and I took over the MA business in 2020, there's been a series of, whether they be macro political COVID headwinds that have challenged the M&A market, I'd say. And we're now at a point where I would say there's a number of new factors. Obviously, geopolitical has risen to the top of the list currently, which has caused global instability. And you certainly have seen a dearth of cross-border activity. That being said, interest rates now are, I won't say, stable, but they're being better understood by the market over the last year and a half. We just saw a rapid escalation in interest rates. And it was really that change in rates that led to difficulties for private equity to execute deals. The difficulties for boards to price deals, and it led to difficulty for investment banks to be able to price debt underwrite debt with confidence that rates weren't going to move so dramatically that it would cause dislocation, which is what you saw over the last year or two.”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT
“Stefan, when we last spoke about the same time last year, we were facing a lot of the same macro head ones that we're facing today. We had just seen a year of dramatic interest rate increases. We had recession fears, geopolitical concerns. So start by explaining to us how that macro backdrop affected strategic M&A activity this year.”
2023-12-12 · Goldman Sachs Exchanges · M&A in 2024: Navigating opportunities and challenges · IDENTIFIED FROM THE TRANSCRIPT