Executive summary:
- Fourth-quarter advisory fees diverged sharply among major US banks, even as overall investment banking revenue in 2025 reached its second-highest level on record, driven by a rebound in global M&A and a wave of megadeals.
- Dealmakers are entering 2026 with fuller corporate and private equity pipelines, supported by stabilizing financing conditions, recovering valuations and rising confidence across Europe and the Americas.
- Activity remains uneven beneath the surface, with deal counts lagging headline value, midmarket M&A slower than large-cap transactions, and sentiment still below long-term historical averages.
- Artificial intelligence, innovation-driven sector shifts and a growing role for private equity are expected to shape deal activity, alongside ongoing macroeconomic and geopolitical uncertainty.
Investment banking and advisory fees in Q4 2025
Year-over-year changes in fourth-quarter investment banking advisory fees showed a wide dispersion in performance among the largest US banks.
Citigroup posted the largest increase, with advisory fees up 84% from a year earlier. Morgan Stanley followed with a 45% gain, while Goldman Sachs reported a 41% increase.
At the lower end, Bank of America recorded a 6% rise in advisory fees, while JPMorgan Chase reported a 3% decline from the prior year.
Across the five banks, advisory fees increased an average of about 35% year over year in the fourth quarter.
Overall, investment banking revenue topped $100 billion in 2025, the second-highest annual total ever recorded, according to Dealogic. The firm, whose figures tend to reflect larger banks and transactions, said the headline total was fueled by a surge in global mergers and acquisitions, which climbed 42% year over year to $5.1 trillion.
Much of that growth came from a wave of megadeals, particularly in the Americas, where M&A volume jumped 45%, driven by a 108% increase in large-cap transactions and a 57% rise in sponsor-backed activity, Goldman Sachs reported.
"The world is set up at the moment to be incredibly constructive in 2026 for M&A and capital markets," Goldman Sachs CEO David Solomon said on a call with analysts.
Morgan Stanley echoed that optimism. "We are seeing an accelerating pipeline in M&A and IPOs," Chief Financial Officer Sharon Yeshaya told Reuters, adding that the bank expects more activity in the healthcare and industrial sectors.
Reflecting confidence in investment banking within the upper markets, analysts are forecasting an 11% increase in investment banking revenues over 2026 at Morgan Stanley and Goldman Sachs. Shares of the two firms, two weeks into January, are trading at their highest levels in more than a decade relative to projected earnings over the next 12 months.
Still, the broader market in 2025, according to many bankers, is telling a slightly more nuanced story for 2026.
Deloitte described the year as “a tale of two markets,” noting that while total US deal value rose, the number of deals remained relatively flat due to some stagnation in the lower and middle markets. However, that disconnect, Deloitte said, may open the door for greater value creation in midmarket and smaller deals going forward.
BCG echoed those predictions with similar data, reporting approximately 33,000 majority M&A transactions in 2025, compared with about 33,800 in 2024 and far below the 2021 peak of 41,300.
Market sentiment and the investment banking outlook
Many investment bankers on Wall Street say expectations for dealmaking in 2026 remain high, even after activity in 2025 failed to meet earlier forecasts. As the year begins, they describe a familiar sense of cautious optimism, pointing to easing inflation, modestly lower interest rates, recovering valuations across regions and more stable capital markets.
Deloitte’s latest M&A Trends Survey shows rising optimism among dealmakers for the coming year. A strong majority of both corporate and private equity respondents expect to increase the number and total value of deals they’ll complete over the next 12 months.
When asked whether they anticipate an increase, no change or a decrease in deal volume next year, 90% of PE respondents and 80% of corporate respondents said they expect an increase.
Expectations for aggregate deal value were similarly high, with 87% of PE respondents and 81% of corporate respondents predicting growth. Still, sentiment is somewhat more cautious than it was a year ago.
Similarly, BCG’s M&A Sentiment Index reflects an improving but still cautious outlook. While the global index has rebounded sharply from its late 2022 low, it stood at 75 as of early 2026—below the long-term average of 100 and down from 88 in October 2024.
Optimism is strongest in Europe, where the index reached 96 in December, well above the 66 recorded in February despite slipping from a September peak of 100. In the Americas, sentiment continued to improve, rising to 91 in December from 68 in August.
Tech M&A and artificial intelligence
According to a recent survey conducted by Goldman Sachs, 51% of respondents believe artificial intelligence will have a moderate to high impact on M&A strategy in 2026.
Many bankers on Wall St expect M&A activity in 2026, like in 2025, to be shaped by the speed of innovation, particularly in sectors like biopharma and artificial intelligence. In 2025, several biopharma and tech companies reached multi-billion-dollar valuations in a short time, becoming either acquisition targets or acquirers themselves.
That dynamic is expected to extend into artificial intelligence, where early-stage firms with breakthrough technologies are quickly attracting strategic buyers and commanding high valuations.
Many dealmakers also expect the pace of dealmaking to accelerate in 2026 as innovation cycles shorten. In sectors like software, product shifts can happen so quickly that identifying acquisition targets and disruption risks is becoming more difficult. That’s expected to favor buyers who can act early and decisively.
In a recent report, Lazard said it expects AI-driven consolidation to expand beyond the tech sector into industries such as healthcare, where applications are becoming more established. As a result, AI is also seen as a factor that will further widen the gap between corporate winners and losers, leading to more urgent and targeted M&A strategies.
Private equity poised for expansion
US private equity firms completed more than 9,000 deals in 2025, with total transaction value reaching $1.2 trillion, according to PitchBook. The total fell just short of the $1.3 trillion industry record set in 2021, marking only the second time on record that US private equity deal value surpassed the $1 trillion threshold.
Meanwhile, according to a recent survey by Goldman Sachs, 51% of respondents said they expect access to private capital to have a moderate to high impact on their M&A decision-making in 2026.
The survey also highlighted a 31% year-over-year increase in global take-private deal volume, underscoring the growing role of private capital in shaping the deal landscape.
Meanwhile, most of Lazard’s managing directors expect private equity-related M&A in their coverage areas to rise in 2026 compared to 2025. With holding periods for portfolio companies extending, general partners are under growing pressure from limited partners to exit long-held investments.
Overall, Lazard noted in its 2026 outlook, exits have become more feasible than in prior years as equity markets have recovered, helping to close valuation gaps between buyers and sellers and reducing the number of underwater positions. At the same time, with an estimated $2 trillion in undeployed private equity capital, firms are under pressure to put money to work through new acquisitions.
Just as important, in 2026, the total capital in private equity could expand further as the industry moves closer to unlocking large new sources of investment. While it has traditionally served institutional investors such as public pensions, endowments, and sovereign wealth funds, a potential shift in US regulation could open access to retail investors.
Under the Trump administration, the Securities and Exchange Commission has moved to ease wealth requirements for certain private market funds. A possible next step could allow 401(k) retirement savers to invest in alternative assets, including private equity. As of the end of 2024, 401(k) accounts held around $12.4 trillion—unlocking even a fraction of that could significantly reshape the industry.
Looking ahead: key drivers of the macroeconomic outlook in 2026
Economic growth: 2025 saw steady but uneven economic growth. The labor market remained relatively stable through much of the year but showed signs of weakening later on. Inflation moderated at times but remained persistent. Lower-income consumers faced greater pressure from prices, while higher-income households accounted for a disproportionate share of spending. These dynamics carry into 2026 and are central to how the executives, investors and the Federal Reserve are assessing the economy.
Interest rates and financing conditions: In 2025, some optimism was driven by the expectation that the Federal Reserve would begin lowering interest rates in a steady and meaningful way. That did not materialize to the extent many had anticipated and as a result, even while expectations for further rate cuts continue, there is more uncertainty entering 2026 over their size and timing.
Government policy and regulation: On the policy front, trade remains a key area of uncertainty. There is a possibility that the Supreme Court could strike down elements of the Trump administration’s tariff policies. While the administration would have options to impose new tariffs, this could introduce renewed uncertainty around their structure, scope and duration. By contrast, no major federal tax changes are expected.
International politics and geopolitics: Geopolitical conditions remain complex and fluid. Trade tensions between the United States and China continue, though markets have largely adapted to that dynamic.
Relations with the European Union could introduce additional uncertainty over trade and the territory of Greenland. Conflicts involving countries such as Iran and Venezuela have not significantly rattled markets, but geopolitical conflicts are inherently volatile and difficult to predict, contributing to a broadly uncertain global backdrop.
Despite persistent uncertainty, many bankers say they are entering 2026 from a materially stronger position than in recent years, with healthier balance sheets, larger corporate and private equity pipelines and more stable financing conditions.
While economic signals remain uneven, they point to moderating inflation, steadier capital markets and improving confidence as evidence that the operating environment has become more supportive.
Overall, experience in 2025 showed that markets can continue to function through political and geopolitical disruptions, reinforcing expectations for a more active year ahead even as those risks remain part of the landscape.
