Rosalind Evans
After a stagnant period on Wall Street the previous year, investment banks found themselves in a tight spot. The typical profit avenues, such as advice or financial assistance during company public offerings or acquisitions, dried up.
However, after two challenging years, a silver lining appears for bankers: artificial intelligence.
Background:
Market volatility and fears of a declining economy have drastically reduced initial public offerings. In 2022, the US IPO market plummeted to an astonishing $8 billion, marking a decline of 94.8% – its lowest in 32 years.
Goldman Sachs, in 2023, reflected this downturn. Their reported profits took a significant hit, with investment banking revenues decreasing by 20%. It was their lowest profit quarter since the early 2020 recession. Goldman CEO David Solomon commented that much of the investment banking activity was at an all-time low for the decade.
A Turnaround:
But there’s a shift. As of 2023, there has been a 22% rise in IPOs compared to the previous year, with many centred around AI and technology. The UK’s chip manufacturer, Arm, was prominent among these, which started trading on the Nasdaq. Similarly, Instacart’s IPO marked another significant entry in the tech domain.
Although these stocks have seen some fluctuations post their IPO, their successful launch encourages other budding AI and tech firms to consider going public.
Mergers & Acquisitions:
A study by EY indicates that most US CEOs, around 80%, are looking to incorporate AI in their offerings within the upcoming year. This will drive demand for AI-related mergers and acquisitions. EY’s Mitch Berlin stated that AI will play a disruptive role for CEOs today and dominate M&A activities.
The recent acquisition of Splunk, an AI-integrated cybersecurity firm by Cisco for $28 billion, stands as testimony. Tech analyst Dan Ives predicts a surge in tech and software-based M&As in the upcoming months.
3M’s Costly Sanctions Settlement:
3M has consented to a nearly $10 million settlement over alleged violations of Iranian sanctions, as reported by the US Office of Foreign Assets Control. The violations pertain to sales by a 3M subsidiary to an Iranian law enforcement entity between 2016 and 2018. This adds to the list of costly settlements for 3M in the year, including a multi-billion-dollar settlement related to toxic substances in drinking water and another $6 billion payout related to defective combat earplugs.
Costco’s Healthcare Dive:
Renowned for its bulk purchasing deals, Costco is now entering the healthcare arena. Collaborating with Sesame, a healthcare platform, Costco now offers online medical consultations for its members starting at $29. Costco’s move mirrors that of Amazon, CVS, and Walgreens, as the demand for immediate healthcare access beyond conventional hospital settings grows.
As the investment world adapts to a rapidly evolving landscape, mainly driven by technological innovation, major corporations are also maneuvering to address their challenges and tap into new markets. From Wall Street’s resurgence with AI’s aid to 3M’s sanction woes and Costco’s bold foray into healthcare, the corporate landscape is constantly in flux, reflecting the dynamic nature of our times. These shifts highlight the significance of adaptability and foresight in navigating the complex business world today.
