GE, J&J breakups add more fuel to banks' dealmaking fire
BNN Bloomberg
Wall Street’s coming out on top in the latest slate of corporate divorces.
Wall Street’s coming out on top in the latest slate of corporate divorces.
A week for high-profile breakups with Johnson & Johnson’s split and General Electric Co.’s separation raises the likelihood of similar deals on the horizon and promises to generate even more fees for investment banks, including Goldman Sachs Group Inc. and JPMorgan Chase & Co. A flurry of splits stands to beef up an M&A market under threat by tighter regulations, further pressing executives to make a splashy move.
“You’re seeing some companies choosing to get bigger to create scale and others trying to become more focused and play to their strengths,” said Jason Goldberg, a bank analyst at Barclays Plc. “Both strategies have their merits and it’s kind of a company-specific situation, but to sit there and do nothing is no longer an option.”
Wall Street banks have reaped the gains of a record-breaking year for global dealmaking, with Goldman reporting all-time high advisory revenue in the third quarter. Now, corporate reshapings stand to benefit firms such as Goldman, JPMorgan and Bank of America Corp., as well as Evercore Inc. and PJT Partners Inc.
The breakups are “another sign that this M&A cycle could still have legs to run on,” said Jeff Harte, an analyst at Piper Sandler Cos. “Not only does it create some transactions that investment banks can get involved in and generate some fees, but it also suggests a market where it’s not so much a real frothy bidding-up of assets.”
The division of larger companies creates smaller firms that can be part of later deals, Marco Caggiano, the co-head of North America M&A at JPMorgan, said in an interview.
