After two sluggish years, Wall Street is back in deal mode. Investment bankers are smiling again, and M&A desks that collected dust in 2023 are humming with new mandates. Rebounding is not a miracle. It involves momentum and math. The Fed hinted at rate decreases, inflation fell more quickly than anticipated, and business confidence rebounded. Eventually, CEOs who were sitting on record wealth piles ran out of reasons to "wait and see. With dry powder in hand,
private equity firms are making a comeback, particularly in the tech infrastructure, healthcare, and energy transition sectors. Refinitiv data shows that U.S. IPO filings have increased by about 12% year over year, while global M&A volume has increased by 27%.
The once-frozen desire for public listings is warming up. Even SPACs, which were declared extinct in 2022, are making a comeback in discussions. Of course, there are limitations to Wall Street's optimism. Geopolitical danger and high valuations could put a stop to it. Regulations scrutinize cross-border transactions, particularly those involving data and defense technology. Additionally, investors are much less forgiving now that capital is flowing again since businesses can no longer "story tell" their way to higher multiples. Still, the mood has shifted. The capital markets machine, fueled by lower rates and pent-up demand, is running hot. Whether this cycle ends in sustained growth or another overconfident binge depends on how long discipline lasts before greed takes over.
