Goldman Sachs banker flags private equity retreat from auctions as strategic buyers dominate

Private equity firms are increasingly walking away from deal auctions because they simply cannot keep up with what strategic buyers are willing to pay. That’s the assessment from one of Goldman Sachs’ most senior Swiss bankers, and it paints a stark picture of how higher interest rates have reshuffled the M&A pecking order. Fedor Schulten, managing director at Goldman Sachs’ Zurich investment bank, laid out the problem at the EuropaInstitut conference on September 22. PE funds are exhibiting dropout rates as high as 50% in sell-side processes, he noted, a figure that would have been unthinkable during the easy-money years. The math no longer works The core issue is straightforward. Private equity firms rely on leverage to juice returns, and leverage got a lot more expensive when central banks hiked rates. Strategic buyers, meaning corporations acquiring competitors or complementary businesses, don’t face the same constraint. They can pay with cash on their balance sheets or stock, and they often extract synergies that financial buyers cannot. The result is a quiet but meaningful shift in who wins deals. PE accounted for less than 20% of total M&A deals in Switzerland recent...