Morgan Stanley’s Sarah Lloyd-Johns: Investors play a rates waiting game

Sarah Lloyd-Johns, Managing Director, Investment Banking at Morgan Stanley expects M&A to continue to experience a material rebound in 2025.

In this excerpt from our 2025 ANZ Women In Dealmaking M&A Outlook Report, which features insights from 12 of Australia’s leading female dealmakers, Sarah shares her perspective on market recovery trends, capital availability, and evolving transaction processes.

“We’re still early in the M&A and capital markets recovery story. But there is growing optimism, supported by a more constructive interest rate outlook and the positive demand and supply demand dynamics with regards to private equity that we’ve been talking about for a number of years, will support activity this year”.

Sarah acknowledges uncertainties in the market remain, particularly around the timing and quantum of interest rate cuts, the impact of the new policies from the Trump administration and broader global geopolitical situations.

Factors that could push back the recovery in M&A into 2026 include a delay to interest rates cuts or a material drop in real GDP growth, particularly in the US. “We’ll start to have more clarity on these risks in the first half,” she states.

“There is about US$3.7 trillion in dry capital to be deployed by private equity, including US$1 trillion in the buyout sector, which, together with large and ageing sponsor portfolios, will drive M&A volumes in 2025. We’re seeing constructive capital markets to support that activity that weren’t there to the same extent in 2024.”

Sarah says there is potential for new M&A laws to impact the way processes are run. 

“There’s still a lot of detail to be determined with regards to the merger reforms. However, the way we engage with trade players and sponsors with portfolio companies in the same or adjacent markets will change given the heightened regulatory focus. Transaction timelines will be impacted as a result, with more work being done both pre and post launch with regards to bidder engagement and preparing strategies and documents that will be required for ACCC approvals.”

The result will be longer periods of more bespoke engagement to ensure these parties are as competitive as possible when it comes to the transaction process to help offset heightened regulatory risk around the conditionality that will be associated with bids.

“Gone are the days of running a standard process and being able to achieve a strong outcome. While there will be some routine deals, on the whole processes will need to be more nimble,” she says.

Sarah expects to see more creative solutions to financing deals and getting deals over the line. “We’ll see more partnerships with corporates and more proactivity on the equity and debt side with co-investments and pre-syndication of debt. Sponsors will be more creative in how they get deals done.”

Turning to due diligence, timelines are being extended, with processes taking longer due to greater due diligence focus.

“Bidders are undertaking more fulsome due diligence across all areas, from the traditional finance, tax and legal aspects to tech, cyber risk and ESG. From a sell side perspective, there is more preparation being done pre-launch to have a full set of vendor due diligence reports and targeted company materials. This should help reduce the due diligence burden for both the buyside and sellside once the process has launched,” Sarah says.

When it comes to cross-border M&A, Australia is an attractive market with cross-border transactions making up around 70% of transactions in 2024 compared to around 50% historically.

“We expect the share of cross-border transactions to continue to be strong over the next 12 months,” Sarah notes.

“We’ve seen a number of global funds over the last 12 months set up shop in Australia or in the region with a focused mandate to invest in Australia. Offshore bidders, whether financial or trade, are incredibly important to ensure a successful outcome for Australian M&A transactions.”

Reflecting on her career, Sarah says investment banking wasn’t her original career plan, but it’s been a fruitful path.

“I did an internship to rule out going into investment banking, but after two months I was hooked. What I love about deal making is that while there are day-to-day similarities in the work I do, every deal and situation is different. There is the constant problem solving in managing a transaction to drive successful outcomes for our clients, while mitigating risks. It makes the job incredibly interesting. Getting to know our clients and their business intimately also keeps me engaged in banking over the long term.”

Having the right networks with clients, other advisers and the broader industry is paramount. “Professional networks help foster these relationships and you never know when a conversation at an event could result in a lead or deal down the track.”

Sarah’s challenge to the investment banking sector is to continue to evolve from the lessons of COVID to make sure there is a more balanced workplace environment to attract and retain more women in dealmaking.