Goldman Sachs CEO: IPO Market and Deal Making Set for a Comeback

As the dust settles on a tumultuous year for the global economy, one thing is clear: the IPO market and deal-making activity are poised for a significant rebound in 2025. Goldman Sachs CEO David Solomon recently shared his optimism about the upcoming spate of tech IPOs and the potential for a resurgence in mergers and acquisitions (M&A). Let's delve into the factors contributing to this bullish outlook and explore the role private equity firms will play in driving this growth.



A Perfect Storm for IPOs and M&A

Goldman Sachs' optimism is rooted in several key factors that suggest a strong comeback for the IPO market and deal-making activity:

1. Improved Business Environment: Solomon noted that the business environment is becoming more constructive, which always helps in boosting optimism. He also mentioned that there is a more constructive kind of optimism, indicating a positive outlook for the market (Solomon, 2025).
2. Incoming Trump Administration: Solomon expressed optimism about the incoming Trump administration, suggesting that it could bring reasons for business optimism. However, he also acknowledged the unknowns that create risk (Solomon, 2025).
3. Increased Appetite for Deal Making: Solomon mentioned that there is a significant backlog from sponsors and an overall increased appetite for dealmaking supported by an improved regulatory backdrop. This increased appetite for dealmaking can translate into a more active IPO market (Solomon, 2025).
4. Strong Market Performance: The stock market has had a strong two-year run, with the S&P 500 and Nasdaq hitting fresh records last month. This strong performance can indicate a more favorable environment for IPOs (Solomon, 2025).
5. Upcoming IPOs: Solomon specifically mentioned that the upcoming IPOs of companies like Arm and Instacart could help kickstart the muted capital markets. If these IPOs go well, it could encourage other companies to follow suit, leading to a rebound in IPO activity (Solomon, 2025).
6. Improving IPO Market Sentiment: More than half of the investors surveyed in Goldman Sachs' Bi-Annual Equity Capital Markets Survey said that they are more bullish than they were a year ago, indicating a shift in sentiment towards IPOs (Ludwig, 2023).
7. Increasing Risk Appetite: Issuer and investor sentiment is improving in parallel, with more than half of survey respondents reporting a high-risk appetite for IPOs in the last quarter of this year and the first quarter of 2024. This increasing risk appetite can contribute to a rebound in the IPO market (Reed, 2023).
8. Need for Funding: The age of innovation requires significant funding, which can drive the need for IPOs. As the environment for capital raising becomes more robust, companies may turn to IPOs to secure the necessary funding (Dees, 2024).



The Role of Private Equity Firms

Private equity firms are expected to play a significant role in the anticipated increase in dealmaking in 2025. According to Mark Sorrell, co-head of the global mergers and acquisitions business at Goldman Sachs, private equity firms are deploying capital at a rate closer to historical averages, indicating a higher level of activity. This is a notable shift from the decline in deployment observed earlier in the year. Additionally, a substantial amount of this capital is being used to take public companies private, suggesting a significant role for private equity in the M&A landscape.

Stephan Feldgoise, also a co-head of the global mergers and acquisitions business at Goldman Sachs, highlights the importance of private equity firms in driving deal activity. He notes that the pace of mergers and acquisitions around the world has gained momentum this year and is expected to accelerate in 2025, with private equity firms being a key driver of this growth. This is further supported by the fact that private equity firms accounted for almost 40% of global merger volume in 2023, nearly double their share from a decade ago.

In summary, private equity firms are expected to play a crucial role in the increase in dealmaking in 2025, with their capital deployment and M&A activity contributing significantly to the overall growth in the market.

Conclusion

The stage is set for a comeback in the IPO market and deal-making activity in 2025. With a perfect storm of factors contributing to this bullish outlook, investors and businesses alike should be prepared to capitalize on the opportunities that lie ahead. As Goldman Sachs CEO David Solomon noted, the IPO market and deal-making activity are poised for a significant rebound, and private equity firms will play a crucial role in driving this growth. Stay tuned for more updates on this exciting development in the world of finance.