Head of Investment & Corporate Banking for Mizuho Americas, Michal Katz, sat down with private capital executives Christina Lee of Oaktree, Julia Wittlin of Redbird Capital Partners and Leigh Sansone of Paceline Equity Partners to moderate "The GP Perspective" a panel discussion at the WithIntelligence Women’s Private Capital Summit in NYC last month. Here are the takeaways from the discussion written by Michal Katz.
Dealmaking is back. The investment banking fee pool is up 36% year-to-date across capital markets and advisory. Bankers, investors and corporates anticipate further activity in 2025 now that the uncertainty of the election is behind us and the Fed has started pivoting to lower rates underpinned by supportive economic data.
Though the economy is strong, we are not full throttle yet. Much remains to be seen, most notably the impact of campaign trail promises (tariffs, immigration, taxes and regulation) on the resilience of the U.S. consumer and the economy broadly. Concerns aside, areas of opportunity remain robust: the AI revolution and its broad wingspan across industries, a backlog of long-dated private equity portfolio companies waiting to be monetized, the need for new and upgraded infrastructure amid an industrial renaissance, the business of sports, dealmaking conceived out of restructuring or special situations and the opportunity for cross-border deals.
The Known Unknowns
President-elect Trump may not get everything on his wish list, but the outstanding election promises have the potential to hobble the economy. Tariffs may lead to higher inflation, especially for consumers, which will eat into corporate profits and performance. Mass deportation of immigrants will thin the employment ranks and spur further inflationary pressures. This could influence the Fed’s decision to cut rates and lead to a higher-for-longer rate environment which may temper dealmaking.
The panelists noted that “a lot of geopolitical risks and existential risks are just really difficult to factor in.” But on the flip side, with the prospect of easing regulatory scrutiny, we could potentially see less government anti-trust actions, a positive for M&A.
Opportunities Abound
Challenges aside, opportunities remain robust:
- Core infrastructure such as roads, bridges and airports are still top of mind notwithstanding the buildout of datacenters and towers to support AI and the digital age
- AI will support technological and industrial expansion as well as a blossoming need for power, energy and utilities to meet demand
- Structurally, PE/VC firms have a backlog of companies that are waiting for the markets to open for monetization and return capital to LPs. Some of those companies’ capital structures have been strained from the last couple of years of rising rates and may need to be restructured, while others are facing a reckoning on ZIRP-era valuations which helps bridge the bid/ask spread in M&A negotiations
- The business of sports is dominating the headlines. Opportunities to invest in teams, leagues, media rights and the broader ecosystem come with loyal, intergenerational fanbases, are hard to disintermediate and provide steady revenue streams for investors
- As the U.S. decouples from some parts of the world, cross-border opportunities will appear in the form of price arbitrage as will the chance to expand, diversify and bring supply chains closer to home
Back to Basics
All of this points to a healthy revival of M&A deal activity, but it will take time and require going back to playbook basics to prosecute business. The specter of multiple geopolitical rifts is a persistent wildcard. One panelist told investors that it is exceptionally difficult to time the market so play the long game and focus on high-quality assets rather than use financial engineering to create value. A bottom up, thorough fundamental research approach coupled with good timing will coalesce with the animal spirits ahead.