Americas Investment Banks Structural M&A growth persists, but expenses continue to rise, with valuation upside less likely

Equity Research 11 August 2026 | 1:07AM EDT

Structural M&A growth persists, but expenses continue to rise, with valuation upside less likely; key themes exiting 2Q26 EPS

Independent investment bank (IBank) stocks fell ~2% on contemplated. Finally, as we are mid-cycle, we see less James Yaro | average since the day before the first 2Q26 IBank EPS rerating potential - IBank multiples typically peak early Goldman Sachs & Co. LLC print (7/22/26),1 underperforming the S&P 500 by 5pp, cycle. Thus, stock performance appears set to be largely Divyam Harlalka driven largely by estimate downgrades, on: 1) concerns driven by EPS revisions. We highlight three key 2H26 | that there could be an M&A air pocket in 2H26; 2) uneven themes: 1) how much strategic/large-cap M&A can grow Goldman Sachs India SPL

M&A trends across peers; and 3) a 1% median earnings from an already strong level, vs. potential acceleration Matthew Weng | miss (marking the first time in ~4+ years IBanks missed in sponsor/mid-cap M&A; 2) the ability for growth to Goldman Sachs & Co. LLC EPS for two consecutive quarters), driven by higher continue after years of robust non-M&A advisory Lokesh Kumar Sangewar | expenses than expected. All in, we believe that at the growth, specifically within secondaries and Goldman Sachs India SPL midpoint of the cycle, the M&A growth path remains restructuring; and 3) mounting questions around strong for the group, with several years of M&A growth structural negative operating leverage, driven by both Thirukumaran R | left. We shift our preference to sponsor and mid-cap heavier comp and non-comp spend. YTD, industry Goldman Sachs India SPL (<$10bn deal size) M&A from large-cap, strategic M&A. announced M&A volumes are up ~40% YoY, driven by We view these as likely to have stronger growth from here large-cap/strategic M&A strength (up ~80%/55% YTD off of a low base and in light of structural tailwinds, YoY), vs. more tepid mid-cap/sponsor M&A (up ~30%/5%). whereas the second derivative of large-cap & strategic 2Q26 restructuring was down 1% YoY, and 1H26 M&A could turn negative. We see IBanks’ operating secondaries volume rose 19% YoY. The group trades at a leverage path as increasingly challenged, after lowering ~16.0x average NTM P/E (on GSe), or a ~60th %ile multiple2 pre-tax margins for 2026E-28E by 10-25bps vs. pre-EPS, over the past decade. given much greater non-comp spend than previously

2 Note: We exclude LCLN to calculate %ile given a short time period 1 Excluding JEF which has a fiscal year different from calendar year. since its IPO.

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Goldman Sachs Americas Investment Banks