BREAKINGVIEWS-Wall Street’s deal pipeline talk springs a leak

By Stephen Gandel

NEW YORK, March 12 (Reuters Breakingviews) - Wall Street bankers love a metaphor, especially in lieu of results. During the global financial crisis, dealmakers talked up the emergent “green shoots” of recovery when trying to argue that M&A was about to come back. Recently, they’ve swapped horticulture for plumbing, boasting of a bulging “pipeline” of deals – despite a 17% drop in corporate matchmaking to kick off the year, according to LSEG data. Recent layoffs at Bank of America BAC.N, Goldman Sachs GS.N and elsewhere belie the rhetorical bravado.

On Wednesday, Goldman CEO David Solomon said that, while initial public offerings have been few and far between of late, “the pipeline is larger and we expect an increase this year.” Similarly, Bank of America boss Brian Moynihan last month promised that “the pipelines are full.” Morgan Stanley’s MS.N Ted Pick gave a pipeline update in January, saying that incipient deal volumes were “the highest in seven years.”

The hydraulic metaphor contrasts with an arid dealmaking landscape. Back in December, Solomon was more concrete in his predictions, saying that M&A activity in 2025 would surpass the average over the past 10 years. Instead, in the U.S., January and February saw the lowest level in the decade and a half since the financial crisis, reported Reuters, citing data from Dealogic.

Ignoring the words and looking at their actions jibes a little better with the data. On Tuesday, Reuters reported that Bank of America would eliminate 150 jobs in its investment banking division. Goldman recently confirmed that it would make cuts, which the jobs website eFinancialCareers reported would amount to between 3% and 5% of its total staff, or nearly 1,400 jobs.

Granted, banking is a grueling career path, and Wall Street titans regularly lay off underperformers. But Goldman is cutting early, well ahead of its usual firings in the back half of the year. Bank of America, meanwhile, will be offering most affected staff jobs in other divisions, indicating a reallocation of resources away from its dealmaking unit.

All told, outplacement firm Challenger, Gray & Christmas said financial firms announced nearly 6,900 job cuts in February, up from more than 3,600, a year ago. It shouldn’t be surprising. Executives tend to do fewer deals amid economic uncertainty, and President Donald Trump’s chaotic trade policy has created a lot of it. A recent stock-market plunge may cause buyers to rethink what they would be willing to pay and stymie new listings.

None of that has stopped Solomon and his ilk from continuing to predict that the pipeline will soon start flowing. A pointed metaphor can help to buck up spirits. Still, actions speak louder than words.

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CONTEXT NEWS

U.S. investment bank Goldman Sachs plans to cut its staff firm-wide by 3% to 5%, the jobs website eFinancialCareers reported on March 3. The cuts would equate to more than 1,395 of its 46,500 in total employees at the end of last year.

Reuters reported on March 11 that Bank of America is planning a round of layoffs that would eliminate 150 mostly junior-level staffers from its investment bank. The lender will work to find displaced staffers jobs in other divisions, according to the report.