The rise in deals done by private equity firms, accounts for $553billion of M&A so far in 2022, per Refinitiv.

This generates lucrative fees for investment banks like Goldman Sachs and Morgan Stanley as the nature of the buyout business means there are asset flips, equity offerings, follow-ons, and recapitalizations that all generate recurring fees.

All this depends on healthy capital markets, but amid debt-market snafus and falling equity values, this could be another subscription-like business, call it banking-as-a-service, wounded by the downturn.

Private equity clients are ideal for investment banks that otherwise must romance large companies like Microsoft for years before receiving a one-off deal. Firms like Apollo Global Management and Blackstone have generated fees of $6.5 billion so far this year alone, a 44% jump compared to the same time last year.

A leveraged buyout of a Midwestern, family-owned industrial firm might provide the first deal mandate. Then there are the bolt-on acquisitions to grow the company, capital markets-funded dividends, and an eventual sale. If that exit is to another sponsor, the gravy train continues.

Such sponsor-to-sponsor transactions were up 85% year-over-year in 2021, making them the second most-common form of exit, according to data from Bain. The cross-sell and up-sell banking-as-a-service model creates new revenue streams that keep on paying.

Capital market fees work, raising the debt pile that sponsors rely on, or completing initial public offerings are key to the proposition, and that could be in trouble. Global equity issuance is down 67% in the first half YoY, per Refinitiv.

Reuters reported that Banks took $700 million in losses to offload loans supporting the sponsor-led purchase of Citrix Systems this week.

A bunch of other debt packages are stuck on banks’ balance sheets — and until they’re cleared, the banks’ ability to write further big checks is constrained.

Economic uncertainty makes people and investors, become more discerning about how they spend their cash.

Subscriptions, whether it is to Netflix or a favoured investment banker, only makes sense when customers are flush.

For Goldman and its brethren, life may be about to get harder as belts tighten.