In 2024, the world saw a resurgence in mergers and acquisitions after a couple of challenging years. The positive momentum seems to be carrying over into 2025, with some major deals already making headlines.
The M&A Landscape in 2024 and Beyond
- The volume of deals rose by 9% in North America, 10% in Europe, and 3% in Asia in 2024.
- Experts predict a further increase in deal volume by 15% to 20% in 2025 due to various factors like pent-up demand, lower interest rates, expected deregulation, and tax cuts.
According to KPMG International, there is nearly US$3 trillion in dry powder waiting to be deployed in 2025. This significant capital deployment is expected to drive strategic transformations in response to changing market conditions.
Pure Play Dealmakers vs. Financial Giants
- Investment banks focusing on M&A, especially those specializing in investment banking, are expected to benefit from the surge in dealmaking.
- Smaller niche players, with a higher percentage of revenue coming from M&A and investment banking, may see a more significant boost compared to diversified financial giants.
While these pure play firms may be more volatile due to their revenue dependence on investment banking, they could be well-positioned to capitalize on the market trends in 2025.
Four Investment Banking Stocks to Watch
- Jefferies Financial Group Inc (NYSE:)
- Recently reported impressive earnings with a 214% spike in earnings and a 63% revenue increase in Q4.
- Median price target of $88 suggests a 26% gain over the current price of $70.
- P/E ratio of 24 and forward P/E of 16.
- Evercore Partners Inc (NYSE:)
- Saw revenue climb 29% and earnings jump 50% in the last quarter.
- Median price target of $322 per share indicates a 25% increase.
- P/E ratio of 33 and forward P/E of 18.
- Piper Sandler Companies (NYSE:)
- Gained 68% in the past year with a P/E ratio of 30.
- Analysts foresee a 29% growth with a median price target of $365 per share.
- Q4 earnings report due on February 9.
- Perella Weinberg Partners (NASDAQ:)
- Stock surged 103% in the last year and is trading at $22 per share.
- Analysts set a median price target of $28 per share, indicating a 25% increase.
- Earnings report scheduled for February 13.
In conclusion, the M&A landscape is poised for growth in 2025, presenting opportunities for both investors and dealmakers. Understanding the trends and key players in the market can help investors make informed decisions and potentially benefit from the expected surge in dealmaking activities.
- Jefferies Financial Group Inc (NYSE:)