Goldman Sachs Foresees M&A Surge Amid Historic Rail Merger

Goldman Sachs President John Waldron has expressed a positive outlook on the mergers and acquisitions (M&A) landscape, citing accelerating industry consolidation and a rise in private equity-backed deals. Speaking at a Financial Times conference in New York on September 25, 2025, Waldron highlighted Union Pacific's $85 billion acquisition of Norfolk Southern as a significant example of transformative consolidation within the rail industry.

"I think you're going to see more companies, more CEOs, more boards step out and try to do things more like, you know, what we're seeing in rail," Waldron stated. He noted that global M&A activity reached $2.6 trillion in the first seven months of 2025, marking the highest level since the 2021 peak. Waldron also mentioned that Goldman Sachs is observing heightened activity in its own deal pipeline and anticipates that forthcoming Federal Reserve interest rate cuts will further stimulate dealmaking by reducing borrowing costs.

On July 29, 2025, Union Pacific Corporation announced an agreement to acquire Norfolk Southern Corporation in a stock and cash transaction valued at approximately $85 billion. This merger aims to create America's first transcontinental railroad, seamlessly connecting over 50,000 route miles across 43 states from the East Coast to the West Coast. The combined enterprise is expected to unlock approximately $2.75 billion in annualized synergies and deliver substantial long-term value for shareholders.

The proposed merger has elicited mixed reactions from various stakeholders. The International Association of Sheet Metal, Air, Rail and Transportation Workers (SMART-TD), the nation's largest rail union, endorsed the merger after securing written commitments from Union Pacific to protect rail workers' jobs throughout their careers. SMART-TD President Jeremy Ferguson stated, "We are protecting jobs, protecting families, and protecting the future of the U.S. supply chain."

Conversely, the Brotherhood of Maintenance of Way Employes Division (BMWED) remains opposed, citing concerns over job security, especially if track leases to smaller railroads increase. BMWED President Tony Cardwell emphasized the need for stronger job protections, stating, "We're not going to support it."

Industry stakeholders, such as the American Chemistry Council, have expressed apprehension that the merger could reduce competition and lead to higher shipping rates. They warn that consolidating two major railroads might limit customer bargaining power and potentially result in increased costs.

The merger is subject to approval by the Surface Transportation Board (STB), which is expected to conduct a comprehensive review that could take up to two years. Under 2001 rules, rail mergers must prove they enhance competition and serve the public interest. President Donald Trump has expressed initial support for the merger, but union leaders hope to influence his opinion, especially with the STB's final decision potentially hinging on future presidential appointments.

Goldman Sachs has been closely monitoring the M&A landscape. In May 2025, John Waldron noted that despite tariff-related uncertainties, the bank's investment banking business remained strong, with a robust deal pipeline worldwide. He acknowledged that market volatility made it challenging to predict deal closures but remained confident in the overall outlook.

Earlier in March 2025, Oppenheimer downgraded Goldman Sachs, citing concerns that President Trump's tariff policies could hinder the anticipated rebound in M&A activity. The brokerage expressed worries that trade war uncertainties might make companies hesitant to pursue mergers and acquisitions, impacting investment banks reliant on M&A advisory fees.

The Union Pacific-Norfolk Southern merger has several potential implications. While some unions have secured job protection commitments, others remain concerned about potential layoffs or reduced job quality, especially if track leases to smaller railroads increase. The consolidation could lead to reduced competition in the rail industry, potentially resulting in higher shipping rates and decreased service quality for customers. The merger will undergo rigorous review by the STB and other federal agencies to ensure it serves the public interest and does not harm competition.

As the M&A landscape experiences renewed vigor, exemplified by the Union Pacific-Norfolk Southern merger, stakeholders must navigate the complex interplay of economic benefits, labor protections, and regulatory oversight. The outcome of this merger will likely have lasting implications for the rail industry and the broader U.S. economy.