By Tatiana Bautzer
NEW YORK (Reuters) -Morgan Stanley co-president Dan Simkowitz said on Tuesday there is "dramatic improvement" on the deals outlook, not just compared with the months where tariff volatility froze discussions, but considering a longer period in the decade.
Simkowitz said at a banking conference that companies are gaining confidence in reacting to deregulation policies, tax cuts and potential interest rate cuts through the end of the year.
The executive said that after three years of
low activity in capital markets and M&A, there is a large backlog of deals that will create a multi-year stream of transactions.
Many companies' boardrooms are now considering strategic movements as a reaction to new U.S. policies, Simkowitz added. "Industrial policy in the United States is being restructured, and that has impact on supply chains, where you want to put your assets if you're a multinational company".
Financial sponsors are just beginning to monetize their companies, not only because investors want part of their money back, but also for compensation reasons - sales of portfolio companies trigger compensation for the return to the private equity executives.
Morgan Stanley estimates there are 1,500 private equity-owned companies just in the United States worth at least $1 billion. Pent-up demand will also help create a large stream of deals that will go beyond 2026, Simkowitz added.
The reopening of the IPO market, according to the executive, helps reduce the execution risk in M&A deals. Morgan Stanley led the $1.37 billion IPO of Swedish fintech Klarna, that began trading on Wednesday on the New York Stock Exchange.
Morgan Stanley's co-president added that the bank is seeing big organic growth opportunities in the trading area, where it has been gaining market share, and wealth management. But Simkowitz did not rule out potential acquisitions in wealth and asset management, although potential deals would have to clear a high bar to be approved.
CEO Ted Pick had made similar comments about potential acquisitions during the second-quarter earnings call. Pick's predecessor James Gorman transformed Morgan Stanley through a series of major purchases that turned it into a wealth management powerhouse.
(Reporting by Tatiana Bautzer)
