Investment banking has been in a trough in recent years, but signs point to a recovery. M&A and IPO activity are picking up, and Morgan Stanley (MS 1.06%) is one company in the industry that stands to benefit as one of the largest investment banks in the U.S.
Recent years have been tough as mergers and acquisitions (M&A) deals and initial public offerings (IPOs) declined amid an uncertain interest rate environment and regulatory backdrop. But things could be looking up. Here's why.
NYSE: MS
Key Data Points
M&A activity could pick up after a slow start to the year
In the early part of this year, dealmaking activity from M&A showed a mixed picture. For Morgan Stanley, completed M&A totaled $299 billion, a 14% decline when compared with one year earlier. The company noted a decrease in M&A transactions due to economic uncertainty, primarily stemming from U.S. trade policy, which led many clients to defer activity until there was greater certainty.
Looking forward, Morgan Stanley executives express strong optimism for a robust M&A cycle ahead. In January, CEO Ted Pick mentioned that the M&A pipeline is "very strong, depending on how you measure it, the strongest it's been in 5 to 10 years, maybe even longer."
Notably, Morgan Stanley entered the third quarter with a "healthy" investment banking pipeline, and its backlog continues to build across industries, most notably in healthcare and technology.
On top of that, IPO activity is showing signs of life, too. According to Renaissance Capital, 188 IPOs have been filed this year, a 30% increase from last year. Meanwhile, companies have raised $25.2 billion through IPOs, marking a 7.7% increase from last year.
Looking forward, with the Federal Reserve cutting interest rates and more clarity over tariff policy, Morgan Stanley is well positioned for a pickup in M&A and IPO activity, which should bode well for the stock.
