Weekly Research Briefing: No Time For Games

Global deal values have topped $1 trillion in a third quarter for only the second time on record, according to data compiled by Bloomberg, thanks to transactions like Monday’s roughly $55 billion take-private of video game maker Electronic Arts Inc. by a consortium including Silver Lake Management. It means values are now up 27% at around $3 trillion for the year-to-date and on course for their best finish since 2021…

“Companies have wanted to be aggressive in M&A but the uncertainty and regulatory environment were real headwinds,” said Tom Miles, global co-head of M&A at Morgan Stanley. “With those factors improved, they are ready to act.”…

“We’re seeing very little inhibition to analyze and perhaps even carry through with big strategic deals that have been on agendas for a while,” said Dan Mendelow, co-head of investment banking, US, at Evercore Inc. “Companies are anxious to get on with their strategic priorities, including M&A.”

Electronic Arts Inc. agreed to sell itself to Saudi Arabia’s sovereign wealth fund and a pair of private equity firms in a deal that values the company at about $55 billion, marking the largest leveraged buyout on record…

The pact displaces the roughly $45 billion leveraged purchase of power company TXU in 2007 as the largest buyout on record. It’s also one of the largest M&A deal of 2025 and shows Wall Street’s appetite for game-changing mergers despite recession fears and geopolitical concerns impacting the broader economy…

Going private will remove the distraction of quarterly earnings and investor demands. EA’s strength in sports gives the company the predictable revenue that private equity firms like. The company’s sports titles, including Madden NFL, accounted for four of the industry’s top 10 best sellers last year, according to the market research firm Circana.

A pickup in dealmaking and initial public offerings is helping fuel a hot job market on Wall Street.

Big banks had been adding staff over the past year in strategic expansions, but now sudden jumps in activity have them seeking to hire even more and slowing layoffs they might have otherwise executed.

The overall jobs market in the U.S. has slowed and the economy looks weaker, but bankers are showing confidence in the future. They are seeing enough appetite in corporate boardrooms and executive suites, as well as a booming stock market, that they are pushing ahead with plans to expand and battling for top hires.

Morgan Stanley in recent months hired senior bankers in their teams that work with healthcare, technology and industrial companies. Citigroup and Wells Fargo have been ramping up as part of a broad strategy to take more market share. JPMorgan Chase has hired more than 100 managing directors for its global banking division over the past year, a record for the group.

Even a typical fall season of layoffs has been pushed off, and some banks so far haven’t executed cuts that are supposed to weed out lower performers, according to people familiar with the matter.

Bankers say this summer’s big increase in mergers and acquisitions, coupled with momentum in equity-capital markets, has them confident that deal activity is likely to rise further in the coming months.

Bumper demand for corporate credit exposure is helping Wall Street banks recover ground lost to private lenders, just as a tentative revival in M&A activity gathers pace.

JPMorgan Chase, Goldman Sachs and Citigroup have won ultra-competitive mandates on buyout financings from the likes of KKR and Advent International in recent weeks, my colleagues Claire Ruckin and Aaron Weinman report, thanks in part to a welter of new collateralized loan obligation funds that are giving banks the opportunity to slash the rates they can offer borrowers.

Around 160 new structures have put a rocket under syndicated loan markets, pushing borrowing costs to the lowest levels seen for years, according to Daniel Rudnicki Schlumberger, JP Morgan’s head of leveraged finance for EMEA.

The lower the rate, the less likely private credit players will be able to compete with banks that can rapidly parcel out loans to cash-rich CLOs and other institutional investors.

Investment firms sold more than $320 billion of bonds backed by loans this year through mid-August, a record volume, according to a note from JPMorgan, which was written up by Scott Carpenter and Rachel Graf.

“But it’s not just base rates that are coming down. Here we have high-yield spreads. Back in 22, when things looked scariest, high-yield spreads were nearly 600 over. They’ve come down basically in half to 290 over. This, of course, drives down borrowing costs for companies and is very good for the transaction environment.” – Blackstone President Jon Gray

Since the start of August, a basket of stocks with high shares of floating rate debt (GSXUHIFL) has rallied by +12% vs. +3% for the equal-weight S&P 500. In general, rate-sensitive equity trades are less compelling now that market expectations for the Fed are in line with our economists' forecasts. However, the pair trades 4% below its level from late 2024 when the 2-year UST yield was at a similar level to today. Furthermore, in addition to the valuation boost most stocks receive from falling long-term interest rates, these companies receive a tangible earnings benefit from lower near-term interest rates. We estimate that every 100 bp decline in the cost of debt would boost the earnings of these companies by slightly more than 5%. These stocks should also benefit from the increase in interest deductibility legislated in the "One Big Beautiful Bill" fiscal package.

Our IPO Barometer stands at 139 today, ranking in the 88th percentile since 2002. Our IPO Barometer represents a gauge for market participants to monitor if the macro environment is conductive for new IPOs. The barometer incorporates five indicators: (1) S&P 500 drawdown, as measured by how far the index trades from its trailing 52-week high, (2) CEO confidence, (3) change in the nominal 2-year Treasury note yield, (4) the S&P 500 EV/sales valuation ratio, and (5) ISM Manufacturing Index.

Our IPO Barometer signals a healthy current environment for equity issuance, and we expect this to remain the case in the near future. Our forecasts for accelerating US economic growth and healthy equity market returns suggest the Barometer will remain above average. ‬‬

Investment bankers are cheering the recovery in US first-time stock sales. But the revival comes too late to halt a decades-long slump in the number of public companies amid the unchecked growth of private markets.

The number of American public companies stood at around 4,000 last year, around half the number there were in 1996, according to a Bloomberg Intelligence report. On the sidelines are nearly 800 closely held US companies valued at more than $1 billion apiece, including three mega-unicorns — SpaceX, Anthropic and OpenAI — each valued at over $100 billion, BI’s report showed.

The uptick in US initial public offering activity this year has raised $32 billion, the most by this point in the year since 2021, according to data compiled by Bloomberg. Still, that represents only about 181 new firms coming to market, barely making a dent in the list of companies that once would have been prime candidates to go public. With the Trump administration opening the door to making private investments eligible for 401(k)s, at this point it’s hard to see what would derail the momentum.

“It’s not only the fact that the federal government has made it so much more difficult to be a public company and so much more expensive, but they’ve also made it a lot easier to be a private company and for these big companies to get bigger through acquisitions,” said Bloomberg Intelligence’s Andrew Silverman.

@MikeZaccardi: Savita BofA: Raising S&P 500 12m target to 7200
-Our outlook harkens back to the 80s/90s
-Boom-time earnings, mid > mega, tariff deals vs. curveballs, de-reg
-Why broadening now? Next stop for AI, pent-up capex, guidance pop

MARK ZUCKERBERG: “We are going to spend aggressively. Even if we lose a couple hundred billion, it would suck, but it’s better than being behind the race for super intelligence.”
To even hear Zucks say this…it shows how important they believe the opportunity is.
Cap-ex is not slowing down.

“Over the coming years, we expect trillions of dollars to be invested in AI and a significant portion will be spent on memory. As the only U.S.-based manufacturer of memory, Micron is uniquely positioned to benefit from the AI opportunity ahead.” – Micron Technology CEO Sanjay Mehrotra

"Since 2020, CapEx spend in hyperscalers is up sixfold with just four companies, Microsoft, Meta, Google, Amazon, to $364 billion. To put that into context, that is bigger than the budget of NASA, the Department Energy and the Department of State. It's equal to 1% of the GDP of the United States. This doesn't include Oracle, which is now joining the party in a big way. These numbers are gonna be even bigger next year." - Blackstone President Jon Gray

$NVDA CEO on their investment in OpenAI: "This is likely gonna be the next multi-trillion dollar hyperscale company. And who doesn't wanna be an investor in that? You know, my only regret is that, that, uh, they invited us to invest early on. I remember those conversations and we were so poor, you know, that we, we were so poor, we didn't invest enough, you know, and I should have given all my money.

OpenAI is promising Oracle $60 billion a year for compute it doesn’t use, on infrastructure Oracle hasn’t built, powered by energy it doesn’t have, running on chips from Nvidia — which is investing $100 billion into OpenAI. Microsoft, Oracle, Nvidia, OpenAI are all simultaneously one another’s customers, investors, and suppliers…

The question isn’t whether AI is transformative — it almost certainly is. The question is whether the financing loops can hold long enough for revenues to catch up.

There are several theories for why anyone would pay more for a bond from Microsoft or, early last week, Johnson & Johnson, than for a Treasury.

Start, though, with a theory no one believes: They’re safer. All these bonds are rated AAA, while the U.S. has lost its top rating from all of the major credit-rating firms. Microsoft is sitting on $95 billion of cash and has only $40 billion of long-term debt. It is immensely profitable and popular with investors for its nascent artificial-intelligence business.

By contrast, the government owes the public $30 trillion and has spent more than it receives every year since 2001.

@LizAnnSonders: New single-family home sales spiked in August … year/year pace moved up to +15.4%

@nickgerli1: Lennar, America's 2nd largest builder, has cut their average selling price 22% from the pandemic peak. And their most recent quarter's net sales prices is now lower than pre-pandemic.

@DataArbor: While rates have not declined meaningfully – on the short or the long-end, homebuyers have retreated from the market as higher pricing and mortgage rates have collided to exhaust them.

1. Argentina cuts agricultural export taxes to gather currency and help its farmers
2. China fills up its large silos with non-US grain from Argentina, Brazil and Canada
3. The White House pledges "all options" financial support to Argentina
4. US soybean farmers watch. And wait. And now hope for Federal assistance (during a possible government shutdown).

China-based trading firms bought 10 cargoes of Argentine soybeans in a rare buying spree this week, adding to the nation’s reliance on South American supply as it avoids US crops.

The move came after President Javier Milei’s government on Monday announced the temporary suspension of export taxes on many of the country’s key crops, in an effort to boost the supply of dollars in the foreign-exchange market and ease pressure on the peso. Exempt from those taxes, soybean farmers will reap, in pesos, an extra 25% for each dollar they get in revenue.

It also helps boost their appeal compared to US supplies, which are currently subject to duties of more than 20% amid the trade tensions between Beijing and Washington. The Asian nation is the world’s biggest soybean importer, making its purchases closely watched in the global market.

The shipments — all Panamax-sized vessels of 65,000 tons each — are slated to load in November, said the people, who asked not to be named as the information is private. They were sold at a premium of more than $2 a bushel to the Chicago Board of Trade’s November contract, which is currently trading at about $10.05.

Advances in technology mean that it is less important for the tech companies to bring workers to America. Much of the work these H-1B visa holders perform can be done as easily in Istanbul, Tallinn, Warsaw, Prague or Bengaluru as in San Francisco, California (home to Anthropic and OpenAI) or Austin, Texas (home to Oracle).

Engineers with undergraduate degrees from the better eastern Europe, Turkish and Indian universities are every bit as well qualified as their American counterparts. The Trump administration should be encouraging tech companies to expand in the US not scatter overseas.

If companies, fearful of Trump’s next move, change their policies it will mean these foreign economies rather than the US will receive a shot in the arm. It will also deprive America of a fresh generation of entrepreneurs since the most able of the H-1B visa holders often go on to start companies of their own.

The administration might have been better advised to devise a long-term programme that would attract the brightest foreign workers and students to the US. For a start, it could clear up the confusion and uncertainty that still reign, following an earlier decree, among foreign students about how they gain access to the American universities that have offered them places.

How about doubling or tripling the number of H-1B visas? How about automatically offering not H-1B visas but full citizenship to any foreign national who receives a PhD degree in a STEM subject from the 50 highest calibre universities in the country? Trump could also have chosen to demand higher standards of education in the US, starting at elementary school levels.

As a neurosurgeon I care a lot about road safety.

By now you’ve probably seen @Waymo’s stunning safety results (like 91% fewer serious crashes). But they didn’t just publish data headlines. They released the raw CSV files and data dictionaries.

I did a much deeper analysis. A fascinating story emerges when you analyze how they’re achieving this.

This isn’t incremental improvement - it’s categorical. We’re looking at the potential elimination of traffic deaths as a leading cause of mortality.

The intersection breakthrough: Waymo has essentially solved intersection crashes, with 95% fewer injury incidents than human drivers in the same locations. That’s transforming the deadliest driving scenario.

The national math: If every US vehicle performed like Waymo, we’d prevent 33,000-39,000 deaths annually and save $0.9-1.25 trillion in societal costs. Even partial adoption at 27% would save ~10,000 lives per year. In terms of magnitude, this would be the equivalent of eliminating every pedestrian death nationally in a year.

The physics signature: Here’s what fascinates me: 47% of Waymo’s contacts involve less than 1 mph delta-V. They’re not just avoiding crashes; they’re converting unavoidable incidents into gentle bumps. It’s like having physics itself on your side.

We’re not talking about marginal safety gains. The data represents a fundamental shift from harm reduction to harm prevention.