Goldman’s M&A Dominance Deepens, Bolstering Earnings Visibility but Not Yet the Valuation Case

What happened

Goldman Sachs is on track to capture roughly a third of global M&A fees this year, as a surge in mega-deals sets up one of its strongest advisory years in decades. This development directly reinforces the improving investment banking backdrop highlighted in the DeepValue report, where a higher advisory/ECM backlog was already supporting mid‑teens ROE delivery in 1H25. The outsized share of large, complex transactions underscores GS’s competitive moat in scaled, cross-border advisory and should translate into strong near-term fee revenue and positive operating leverage in Global Banking & Markets. At the same time, the incremental strength is occurring against a backdrop of an already-full valuation (~17–18x P/E and ~2.0x P/B) that prices in sustained mid‑teens returns and a cyclical recovery in fee pools. Overall, the news tilts near-term earnings risk to the upside but does not, on its own, resolve structural concerns around capital rules, cyclicality, and margin of safety that anchor the current HOLD/NEUTRAL stance.

Implication

For investors, Goldman's exceptional M&A share should support stronger advisory revenues over the next several quarters, increasing confidence that the firm can sustain ROE in or above its 14–16% target range. This may drive upward revisions to consensus earnings and help justify GS’s premium valuation versus peers, particularly if mega-deal momentum and backlog conversion remain robust. However, the advisory tailwind is cyclical and concentrated in large transactions, which can reverse if macro or regulatory conditions deteriorate, so it does not significantly improve downside protection. Capital and regulatory uncertainty, along with residual Platform Solutions wind-down risk, continue to cap how much multiple expansion is warranted even with stronger deal activity. As a result, the stock screens as an earnings-upside story within a still fully valued framework, favoring disciplined holders and tactical traders over new long-term capital at current levels.

Thesis delta

The news is a positive confirmation of the DeepValue thesis that a recovering M&A/ECM cycle would support GS’s mid‑teens ROE targets and showcase its advisory franchise strength. It modestly improves near-term earnings visibility and raises the probability of upside to investment banking fee forecasts but largely aligns with the recovery already implied in the current valuation. Accordingly, the rating remains HOLD/NEUTRAL: conviction in the quality and momentum of the franchise is higher, but the margin of safety is not meaningfully improved at today’s multiples.