Large-cap investment banking continues to drive this cycle’s recovery

Overview

This report tracks the investment banking cycle in the Americas and globally, with a focus on June and year-to-date trends across three business lines: M&A, ECM, and DCM. The central conclusion is that the investment banking cycle is still in a recovery phase, driven primarily by large-cap deals, strategic-buyer M&A, and large IPOs; however, small- and mid-cap deals, sponsor-led M&A, certain regions, and some sectors remain relatively weak.

Core views

Goldman Sachs sees continued improvement in investment banking activity. Announced banking volume in June rose 31% year-over-year, with M&A up 72%, ECM up 165%, and DCM up 8%. Year-to-date, announced investment banking volume is up 24%, with ECM and M&A showing the strongest growth. M&A strength is mainly driven by large-cap transactions, strategic buyers, Europe, and the United States; ECM is led by IPOs, especially large-cap IPOs; DCM growth is more moderate and supported mainly by large-cap deals, investment-grade debt, and China activity.

Analysis framework

The report uses monthly product-line tracking, segmentation by region and transaction size, sector-level comparisons, year-to-date trend comparisons, cross-border transaction analysis, and Goldman Sachs’ proprietary leading-indicator model to assess M&A growth over the next 12 months. At the equity level, it combines valuation, capital-market backdrop, business-model stability, and company growth characteristics to explain preference for certain investment banking stocks.

Methodology notes

• Leading-Indicator ModelGoldman Sachs Global M&A Leading-Indicator Model

  Uses leading indicators in the United States, Europe, and Asia to forecast year-over-year changes in global M&A transaction volume over the next 12 months.

  The model points to global M&A volume potentially rising 19% year-over-year in the next 12 months, in line with last month’s forecast; Asian indicators improved, while the United States and Europe remained broadly flat.

• Market Layering AnalysisInvestment Banking Product-Line and Deal-Size Segmentation

  Segments transaction activity by M&A, ECM, and DCM, and by large-cap/small-and-mid-cap, strategic buyer/sponsor-led, geography, and sector.

  This framework shows the current recovery is uneven, with large-cap and strategic-buyer deals significantly stronger than sponsor-led and small- and mid-cap deals.

• Equity Evaluation FrameworkGS Factor Profile and M&A Rank

  Goldman Sachs discloses that its equity evaluation compares growth, financial returns, valuation multiples, and composite metrics, and uses M&A Rank to assess M&A takeout probability.

  This framework appears mainly in the disclosure appendix and is used to explain the rationale and M&A probability scoring approach for covered stocks.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• EVR

  One of the preferred investment banking stocks with a Buy rating

  Strengths

  Goldman Sachs believes its disciplined hiring and relatively high growth potential can offset part of the cyclicality pressures.

  Weaknesses

  It remains exposed to the M&A and capital-markets cycle.

  Comparison

  Relatively more exposed to structural growth.

  Risks

  If large-cap M&A and strategic transactions slow, earnings leverage could fall short of expectations.

• LCLN

  One of the preferred investment banking stocks with a Buy rating

  Strengths

  Classified as a company with strong hiring discipline and above-average growth potential.

  Weaknesses

  Still dependent on capital-market activity levels.

  Comparison

  Similar to EVR, it emphasizes structural growth rather than pure cyclical rebound.

  Risks

  Macro or geopolitical shocks could hurt transaction conversion.

• HLI

  One of the preferred investment banking stocks with a Buy rating

  Strengths

  Goldman Sachs views its business model as having more all-weather characteristics.

  Weaknesses

  After broad valuation recovery in the market, additional upside may depend more on fundamental delivery.

  Comparison

  Relatively more defensive and based on a stable business model.

  Risks

  If market risk appetite weakens, valuation multiples could come under pressure.

• PIPR

  One of the preferred investment banking stocks with a Buy rating

  Strengths

  Considered one of the businesses with an all-weather model, and the disclosure notes its relatively high year-to-date cross-border M&A contribution.

  Weaknesses

  The geographic and cross-border M&A mix can affect the quality of earnings.

  Comparison

  Compared with purely cyclical exposure, it has greater business resilience.

  Risks

  Cross-border deal and regulatory uncertainty could affect M&A completion.

• PJT

  One of the preferred investment banking stocks with a Buy rating

  Strengths

  Goldman Sachs believes it has a more all-weather business model, with a relatively high contribution from cross-border deal volume.

  Weaknesses

  If sponsor-led and small- and mid-cap M&A recovery remains delayed, leverage in parts of the business could be limited.

  Comparison

  Relatively benefits more from complex transactions and cross-border activity.

  Risks

  Macro conditions, financing costs, and geopolitical uncertainty may affect transaction cadence.

Key data

• June announced investment banking activity+31% YoYDriven by M&A, ECM, and DCM growth across the board.
• June M&A announced volume+72% YoY / -2% MoMLarge-cap M&A is up 223% year-over-year, while strategic-buyer M&A is up 87% year-over-year.
• June ECM volume+165% YoY / +138% MoMIPO activity is up 758% year-over-year, with large-cap ECM activity strengthening significantly.
• June DCM volume+8% YoY / +1% MoMInvestment-grade debt is up 40% year-over-year, and large-cap DCM is up 491% year-over-year.
• Year-to-date investment banking activity+24% YoYM&A, ECM, and DCM are up 51%, 80%, and 13% year-over-year, respectively.
• Next 12 months M&A forecast+19% YoYFrom Goldman Sachs’ proprietary leading-indicator model, consistent with last month’s forecast.
• Cross-border M&A+112% YoYCross-border deals accounted for 22% of global M&A in June, up 7 percentage points month-over-month.
• Investment banking stock performanceApproximately +11%Investment-banking stocks have risen approximately 11% since the end of 1Q26 but have underperformed the S&P 500 by about 4 percentage points.
• Valuation levelNTM GSe P/E around 16.0xAround the 60th percentile over the past ten years.

Impact & implications

If large-cap M&A and the IPO pipeline continue to deliver, the investment banking revenue cycle is likely to keep improving, benefiting platforms with strong execution capabilities and structural-growth profiles. However, because the recovery is concentrated in large-cap, the United States, Europe, and strategic-buyer transactions, the market may still discount smaller-cap, sponsor-led deals and more cyclical business models. Valuations have already seen some recovery, so further upside requires proof through deal completion, release of deferred fees, and a broader revival of capital-market activity.

Risks

• Macro and geopolitical interactions still make investment banking stocks highly sensitive and contentious.
• The recovery path for small- and mid-cap and sponsor-led M&A remains unclear.
• China M&A activity is still significantly down year-to-date, and some regions weigh on global growth quality.
• Within DCM, high-yield debt and leveraged loans still saw year-over-year declines, indicating that risk appetite for credit has not fully recovered.
• Valuation has recovered to roughly the 60th percentile over the past decade, so further gains require sustained fundamental delivery.

What to watch

• Whether large-cap and strategic-buyer M&A continue to lead.
• Execution of the large IPO pipeline in the coming months of 2026.
• Whether sponsor-led and small- and mid-cap deals see broader recovery.
• Marginal moves in leading indicators in the United States, Europe, and Asia.
• Whether the share of cross-border M&A continues to rise, especially contributions from the United States and Europe.
• Whether the divergence among investment-grade debt, high-yield debt, and leveraged loans in DCM converges.