Goldman Sachs advised on $1 trillion in deals this year through September 2025. That's more than the GDP of Australia. Morgan Stanley posted 60% advisory revenue growth in Q3. JPMorgan's investment banking fees jumped 42%.

And Wall Street bonuses? They're up 12.5% after three years of pain, heading toward $50B in total payouts.

The M&A market collapsed to $2.5 trillion in 2023 (the lowest since 2013) when rising rates and regulatory aggression killed deal confidence. But this year is already tracking toward $2.7 trillion, with megadeals up 19% and tech transactions surging 170%.

This was the year of megadeals: Union Pacific buying Norfolk Southern for $88.3B to create the biggest railroad company in the US, Google acquiring Wiz for $32B all-cash to catch up to the cybersecurity train, or Palo Alto Networks taking over CyberArk for $25B to boost their identity management offering.

Only halfway into the recovery, we are already on track to reach the highest year for deals on record since the 2021 peak of $5.9 trillion.

Historical cycles take 3-4 years from trough to new peak, positioning 2026-2027 as potentially explosive years. Goldman trades at ~9.0x EV/EBITDA despite maintaining 30%+ operating margins, Morgan Stanley commands a premium 12x multiple driven by its wealth management engine, and pure-play boutiques like PJT Partners posted 92% Adjusted EBITDA growth on 37% revenue increases in Q3 2025.

The S&P 500 trades at 15-17x EV/EBITDA. Investment banks trade at 8-10x EV/EBITDA. That's a 44% valuation discount for companies levered to an early-cycle recovery in the second-largest fee pool on Wall Street.

But timing matters.

In this edition of Impactfull Weekly, we break down why 2025 marks the inflection point for investment banking revenues, which firms are positioned to capture the upside, and what could derail the cycle before it peaks.

How investment banks actually make money from M&A

Most people think investment banks just give advice on engineering a transaction. They do, but the economics are more interesting than that.

Investment banks earn fees as a percentage of deal value. Historically, that meant 1-2% of transaction size. A $10B deal earned the advisor $100-200M. But megadeals have compressed this structure. Goldman likely earned $92M advising Mars' $35.9B acquisition of Kellanova. That's a 0.26% fee rate, far below historical norms, because when you're advising on tens of billions, clients negotiate hard.

(source: J.P. Morgan Mid-Year Outlook 2025)

Mid-market deals ($50-500M) still command 2-4% fees. Transactions over $100M typically price at 1-2.5%. Only 30% of advisory firms raised fees in 2024, down from 38% in 2023, despite rising costs. It just goes to say that fee compression is structural and permanent.

So how do banks make this work? Volume and leverage. 

Goldman advised on $1 trillion in announced deals, not just a single $50B transaction. When deal count rises from 45,000 annually (2025's projection) toward 60,000-70,000 (peak years), and when average deal size increases from current levels toward 2021 peaks, total fee pools expand dramatically even as per-deal rates decline.

This is called having a high turnover business: thin margins, high rotation of stock accelerated by the speed of execution, just like supermarkets. Tesco doesn't make much margin on milk, but when millions of customers buy milk every week, tiny margins on huge volumes create enormous profits.

Investment banks operate the same way: 

  • Having 0.5-1.5% margins on $2-3 trillion in deal volume generates between $10 and 45 billion in total fees across the industry.
  • The second profit centre becomes cross-selling. When every M&A transaction mints new millionaires & billionaires, they need someone who has the experience in managing their cash and trust them. Early employees who monetised their shares, founders cashing out…all this requires succession planning, investing and cash allocation services.

According to Bloomberg, the $4.75B in revenue from M&A advisory represents a mere 9% of Goldman's total revenues expected for 2025. 

Once they're advising on a deal, they pitch financing (debt underwriting, equity raises, bridge loans), derivatives to hedge currency or interest rate risks, trading services as well as downstream services for the newly minted millionaires in wealth and asset management. A single $10B acquisition might generate $30M in advisory fees but another $50-100M in ancillary revenues across the bank's platform.

Morgan Stanley demonstrates the above example perfectly. Its wealth management business alone generates $8.23B quarterly at 30.3% margins, providing stability when deal flow fluctuates.

Boutiques take a different approach. PJT Partners & Evercore focus exclusively on advisory, avoiding the capital intensity of lending or trading. They're the Michelin-starred restaurants of M&A: smaller operations, higher prices, better margins.

Three tailwinds behind this recovery

  1. Regulatory ice has thawed

Lina Khan, the Chair of the Federal Trade Commission (FTC), has become one of the most prominent figures in the modern anti-monopoly movement.

But the Trump administration replaced her at the FTC and Jonathan Kanter at DOJ Antitrust, with Andrew Ferguson and Gail Slater in early 2025, both known for a much more dovish, business-friendly approach, signaling a loosening regulatory environment.

To understand the shift, imagine the M&A review process as airport security. Under Khan and Kanter, every passenger had to go through enhanced screening, no matter the risk level, creating long queues and frequent delays. Under Ferguson and Slater, it’s more like having automated pre-check: high-risk transactions still get pulled aside for full inspection, but routine deals move through quickly and with far less friction.

  1. Private equity's $2.9 trillion dry powder demands deployment

Private equity sits on $2.9T in committed capital that must be deployed. Limited partners are getting impatient. They've funded massive commitments since 2021 expecting deployment into high-return assets. 

But the 2022-2023 freeze meant buyout activity has collapsed. H1 2025 private equity-backed LBO transactions hit $150.35B globally, already 70% of full-year 2024 totals, but that's not nearly enough to work through the backlog.

(source: J.P. Morgan Mid-Year Outlook 2025)

Private credit now provides 77-83% of LBO financing (up from 20% pre-2021), creating an entire parallel financing ecosystem. But that doesn't reduce advisory work. It multiplies it, because instead of one syndicated loan, you're negotiating with three to five private credit funds, each wanting different terms, covenants, and security packages.

  1. Cost of capital is declining whilst returns remain elevated

The Federal Reserve easing delivered 50 basis points of cuts in 2025, with another 75 basis points projected through 2026. This matters a lot for acquisition economics, though not in the way most people think.

Lower rates change the entire calculus of what deals make sense.

Corporate balance sheets hold $7.5T in cash globally. That's not just sitting idle. CFOs are running return hurdle calculations daily. When their weighted average cost of capital drops from 8% to 6.5% (as it has over 2025), projects that didn't clear the hurdle rate six months ago suddenly become accretive.

Private equity math is even more interesting. A typical LBO (Leveraged Buy-Out) uses 60-70% debt, 30-40% equity. When debt costs drop 150 basis points, that's a 90-105 basis point reduction in blended cost of capital on a 60-70% debt structure. For a fund targeting 15% IRR, that's huge. It means they can pay higher multiples for targets whilst maintaining return thresholds, expanding the universe of viable deals.

Megadeal renaissance drives profitability

(source: Global M&A H2 2025 Outlook, Goldman Sachs)

2025 recorded 16 megadeals exceeding $10B worth $333B through September, up from $297B in the same period last year. This represents fundamental restructuring of deal flow: whilst total transaction count may fall below 45,000 deals (the lowest in a decade), deals over $1B surged 19% year-over-year.

This is in part due to the industry being inflationary, as deal values go up when price of equity goes up because they can just pass the price increases through inflation to their customers.

(source: S&P Global)

Technology leads with AI and cybersecurity driving +$100B in September deals

Google's $32B all-cash acquisition of Wiz wasn't just the year's largest tech deal. It signalled that strategic buyers are deploying capital aggressively to capture AI-driven security imperatives. Palo Alto Networks' $25B purchase of CyberArk followed the same playbook: consolidate best-in-class security platforms before competitors can.

The pattern extends across semiconductors, cloud infrastructure, and enterprise software. When you're a hyperscaler like Google or Microsoft, you're buying capabilities that would take five years to build internally, and you're removing potential competitors from the market simultaneously.

Energy consolidation continues with $50B+ in transactions

Constellation Energy's $26.6B acquisition of Calpine and the $23.9B takeover bid for Australia's Santos demonstrate that traditional energy isn't dead. It's consolidating. The thesis is simple: new drilling is politically and environmentally challenging, so acquiring existing production and infrastructure is the path to growth.

Geographic concentration at record levels

(source: Mergemarket)

India: 

India's stock market became a money-printing machine in 2024-2025. The country hosted 214 IPOs (initial public offerings) that raised $11.2B in 2024 alone. That's double the $5.5B raised in 2023.

The momentum accelerated into 2025 as both domestic mutual funds and international investors targeted India's booming technology sector, fast-growing financial services companies, and manufacturing businesses benefiting from the "China plus one" supply chain shift. Behind the IPO frenzy sat equally robust merger and acquisition activity: $50B across 1,285 transactions in the first half of 2025.

Quality improved dramatically with 10 deals exceeding $1B each, double the pace of 2024. Banking consolidation drove the action. Emirates NBD paid $3B for 60% of RBL Bank whilst Japan's SMBC invested $1.6B for a 25% stake in Yes Bank.

China: 

China's capital markets told a more sophisticated story than pure M&A figures suggested. Hong Kong reclaimed global leadership for stock market listings with 67 companies raising $23.4B in the first nine months. That's a 229% increase year-over-year. 

The secret weapon: dual listings where Chinese companies list shares in both Hong Kong and mainland exchanges simultaneously, capturing 50-72% of total proceeds. CATL (the world's largest electric vehicle battery maker) raised HK$41B in the year's biggest global IPO. Shanghai and Shenzhen exchanges added another 95 IPOs raising $15.8B through September.

Meanwhile, Chinese domestic M&A surged 45% to $170B in the first half through 29 mega-deals (transactions exceeding $1B each). Seven targeted semiconductors, six focused on healthcare, five concentrated on industrial companies. Beijing in 2025 mobilised capital across equity markets, debt markets, and strategic consolidation simultaneously.

Japan: 

Japan experienced an unprecedented M&A explosion driven by corporate governance pressure and private equity aggression. Deal value hit $157B through August, higher than any full calendar year from 2008 to 2023. The first half alone delivered $139.9B, a 300%+ increase versus 2024's $45B. 

The centrepiece: Toyota Industries' $33B going-private transaction where the parent company bought out minority shareholders. Regulators told every listed company: improve your price-to-book ratio above 1.0 or explain why shareholders should tolerate trading below the value of your assets.

Companies responded by buying back shares, increasing dividends, selling underperforming divisions, and going private entirely. American activist investors holding JPY 4.8T ($33 billion) in Japanese stocks amplified the pressure. Private equity firms seized the opportunity: $53.5B deployed across 30 deals year-to-date versus just $19.9B for all of 2024.

What could go wrong (and what to watch)

Although we are firmly in an acquisitive market, future gains depend on the cycle extending further. Here are inflection points that you need to keep an eye on:

  1. Interest rates stay higher longer

Markets currently price Fed cuts reaching 3% by late 2026. If inflation proves stickier and rates plateau at 4-4.5%, the entire M&A model resets. Every 50 basis points of additional cost removes approximately $150B of viable LBO targets from the market (deals that can't clear private equity's return hurdles). PE drives 40-50% of deal value through exits and add-ons.

  1. Equity market correction freezes CEO confidence

When the VIX (the market's fear gauge) spikes above 30 for sustained periods, M&A activity historically collapses. In June 2022, when the Fed hiked rates aggressively, deal value dropped 40% in the second half versus the first. CEOs don't authorise billion-dollar acquisitions when their own stock is falling 2% daily.

  1. Geopolitical shock triggers capital markets seizure

China-Japan escalation, Taiwan escalation, Middle East conflict expansion, or renewed European banking stress could trigger risk-off sentiment that halts dealmaking overnight. The 2022 experience demonstrated how quickly M&A evaporates: deal value dropped from $1.4T in Q1 2022 to under $850B by Q4. Unlike gradual slowdowns, geopolitical shocks compress decision timelines to days, not quarters.

Companies to watch

(our selection of top companies poised to benefit from the M&A recovery)

Goldman Sachs (NYSE: GS) - Pure-play on global dealmaking

Goldman is the cleanest way to own the M&A upswing. Q3 2025 revenue reached about $15.2B with net earnings of $4.1B and a 9.0x EV/EBITDA , while year-to-date net revenues stand near $44.8B and net income $12.6B. Assets under supervision hit a record roughly $3.5T as the firm leans further into fee-based wealth and asset management. Goldman is currently the number-one global M&A advisor by fees and trades around 2.3× tangible book and ~15× forward earnings, which still prices a normal cycle rather than a boom.

Morgan Stanley (NYSE: MS) - Wealth flywheel with M&A upside

Morgan Stanley is a structurally higher-quality platform where wealth fees fund cyclical banking upside. Q3 2025 net revenues were about $18.2B with net income of $4.6B, up strongly year on year. Wealth Management delivered record $8.2B of revenue, a 30.3% pre-tax margin and $81B of net new assets, reinforcing the durability of its advisory franchise. The firm remains a top-three global M&A advisor and, at roughly 3.4× tangible book, commands a premium multiple that is justified if deal fees normalise into a higher floor.

Nomura (TYO: 8604 / NYSE: NMR) - Japan governance & cross-border M&A leader

Nomura is the cleanest listed way to play Japan’s reform-driven deal cycle plus cross-border activity. Q1 FY2025 net profit rose 52% year on year to about ¥104.6B, the highest first quarter since 2021, helped by strong trading and a rebound in investment banking revenues. Advisory fees benefited from a wave of domestic privatisations and sponsor activity, lifting Nomura to 11th place in the global M&A league tables and first in Japan-related deals. At the same time, its wealth and asset management arms now manage over ¥100T of client assets, providing a stable earnings base.

Smaller companies to invest in

To dig further into smaller companies bound to benefit from the M&A recovery, create your own StockScreener like we did:

Bonus: ETF Screener

To find out more about ETFs available to index this M&A recovery, make your own ETF Screener like we did:

Our take: Fittest have survived, but it’s still a long journey

The M&A machine is running again. But we're in the middle of the cycle, not approaching euphoria.

Leading franchises are already generating 30%+ operating margins whilst trading at just 8–10x EV/EBITDA. The S&P 500 trades at 15-17x for structurally lower margins. That ~44% valuation discount creates opportunity, particularly if deal volumes grind from today's $4T toward +$5-6T over the next few years. This positions as a 2-3 year compounding story, not a quick tactical trade that pays out in quarters.

The winners will be platforms that emerged from the drought stronger. Large US banks combining advisory, wealth management, and balance sheet firepower are best positioned to monetise the upturn. Focused boutiques offer higher operating leverage to megadeals but with concentration risk. The sensible construction is a barbell: one or two diversified US champions at the core, complemented by a smaller position in a high-quality pure advisory house.

This remains a cyclical opportunity within a bullish US equity regime, not secular growth. Regulatory thaw, $2.9T in private equity dry powder, and $7.5T in corporate cash support higher fee pools as funding costs decline. But that same cocktail reverses quickly if CEO confidence deteriorates or equity markets correct sharply.

Exit discipline will matter as much as entry timing.

Stay invested, cautiously.