Good morning. Dealmaking is going to be on the upswing as corporate and private equity clients are preparing to go all in on mergers and acquisitions, according to Morgan Stanley.
This “bullishness” is based on “a view that corporate boardrooms have been quiet for three, four years, and that is not sustainable,” Morgan Stanley CEO Ted Pick said during the Q&A portion of the firm’s earnings call on Tuesday morning. “They need to move.”
Morgan Stanley (No. 61 on the Coins2Day 500) reported net revenue up 4% from a year ago, to $15.1 billion, for the quarter ended March 31. Net income rose 14% to $3.4 billion, compared with a year ago, and the firm reached $7 trillion of client assets across wealth and investment management, resulting from “strong” net new asset growth. Investment banking revenue rose about 16%, to $1.4 billion, in Q1, beating Wall Street estimates, while wealth management saw an increase to $6.9 billion from $6.6 billion.
Advisory revenue of $461 million, compared with $638 million a year ago, reflected a decline in completed M&A transactions, but Pick, who succeeded James Gorman as CEO on Jan. 1, said he expects M&A to make a big rebound.
The pipeline is “clearly growing” across sectors, and on a cross-border basis, Pick said. “There are some who will be willing to take the regulatory risk at this point in the cycle. And there is activity that we will see both from the financial sponsor community and the corporate community.”
He added: “It is not surprising that the C-suite wants to act, so I think we are in the early innings of a multiyear M&A cycle.”
The firm said it is spending on technology and CFO Sharon Yeshaya also noted overall momentum in M&A pipelines. “We’re looking at opportunistic hires in M&A,” Yeshaya said on the call. (Although Morgan Stanley’s global results in Q1 topped forecasts, in Asia, net revenue fell 12%, and the firm is allegedly planning to cut about 50 jobs in the region, Bloomberg reported on Tuesday night.)
Deloitte’s “2024 M&A Trends Survey: Mind the gap,” based on a survey of 1,500 corporate and private equity dealmakers, found that more than three-quarters of respondents—79% of corporate leaders and 86% of PE leaders—expect an increase in deal volume over the next 12 months.
As the appetite for M&A grows, risk will need to be viewed as opportunity, according to the report: “Those who center their M&A planning, strategy, and execution around an embrace of uncertainty will likely experience the greatest success.”
Sheryl Estrada
[email protected]
María Soledad Davila Calero curated the Leaderboard and Overheard sections of today’s newsletter.
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Leaderboard
Debora Delaney was named CFO at Catalina Crunch, a direct-to-consumer healthy snacks company. Delaney comes from serving as CFO of the North American division of Hain Celestial, a snacks company that has brands such as Terra chips. She has experience in the food segment and has also previously worked at KIND North America, Pinnacle Foods, and Mondelez International.
Jeffrey Trigilio was appointed CFO of Obsidian Therapeutics, a clinical-stage biotechnology company. Obsidian’s CEO, Madan Jagasia, highlighted Trigilio’s experience in growing private and public companies. Most recently, he served as CFO for Cullinan Oncology during the process of its IPO.
Big deal
The Global Economic Conditions Survey for Q1 2024 is the latest report by Association of Chartered Certified Accountants (ACCA) and Institute of Management Accountants (IMA). The survey finds that accountants and finance professionals are more confident in the global economy than they have been since Q2 2023.
Other findings include respondents across all sectors and regions are feeling the impact of talent retention risks, with many describing the skills shortage as an “epidemic.” Cybersecurity is also viewed as a significant threat, “especially with advancements in generative AI making ransomware and other cybercrimes increasingly easier and quicker to carry out,” according to the report.
Going deeper
On an episode of Wharton's Marketing Matters podcast, co-host Barbara Kahn spoke with Wharton alum Stuart Weitzman about his storied career in the shoe industry and how “thinking out of the shoebox” led to success. They discuss effective decision-making and innovative marketing ideas.
Overheard
“EV prices have come down, but we aren’t seeing the same consumer response to the [falling] prices that we would see on the gasoline side.”
—Tyson Jominy, a vice president in the Data & Analytics division at J.D. Power, told Coins2Day. Jominy explained that buyers on the lower end are more likely to need to rely on infrastructure to charge their electric vehicles. Until infrastructure improves it’s unlikely that EV sales on lower price points would improve.
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