Goldman Sachs: Watch out for energy M&A in 2015

Mergers and acquisitions (M&A) in healthcare looks set to be strong again this year, Goldman Sachs said on Monday, following deal announcements from pharmaceutical giants Shire and Roche Holdings.

And the co-CEO of Goldman Sachs International, Richard Gnodde, also said that energy—a quieter sector for activity last year—was set to shine in 2015.

Over the weekend, Shire announced it would buy the U.S.'s NPS Pharmaceuticals for $5.2 billion. This was Shire's first big move since a tax inversion deal with AbbVie fell through last year, and shares jumped in early trade on Monday before paring gains.

Ten milligram tablets of the hyperactivity drug, Adderall, made by Shire Plc.
Jb Reed | Bloomberg | Getty Images
Ten milligram tablets of the hyperactivity drug, Adderall, made by Shire Plc.

Goldman Sachs acted as a financial adviser to NPS Pharma regarding the deal, alongside Leerink Partners.

"It was terrific to see the market react on the Shire side in the way it did, with the stock price going up, which shows the market is really still supportive of M&A," Gnodde, who's also co-head of investment banking at Goldman, said on Monday at the bank's strategy conference in London.

"We would expect M&A broadly to continue. We think healthcare will be a big player; telecoms, again, will see a lot of activity. But then potentially even some of the sectors that were quieter last year (such as) energy—there has been so much change in the energy space, that will likely lead to some activity too."

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Most-targeted industry

M&A volumes rebounded in 2014, rising 26 percent on the year to $3.60 trillion, according to financial software provider Dealogic. It marked the third-highest volume on record, behind 2007 ($4.62 trillion) and 2006 ($3.91 trillion).

Healthcare was the most targeted industry for M&A in 2014, with major deals including Actavis's $65.70 billion bid for Allergan, and Medtronic's $46.8 billion offer for Covidien.

Shire's weekend announcement saw stockbroking firm Panmure Gordon reiterate its "buy" recommendation on the Irish drug major on Monday.

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Roche bid

In other news from the sector, Switzerland's Roche made a majority bid for Massachusetts-based Foundation Medicine—to which Goldman Sachs is also acting as an adviser.

Roche said it would tender for 15.6 million shares in the genomic and molecular analysis firm at $50 a share—more than twice their value on Friday—and said it would additionally invest $250 million by acquiring 5 million newly issued shares at $50 per share.

Roche shares traded around 2 percent higher on Monday after the news.

"Markets are at much higher levels than when this M&A run started 12-18 months ago. Premiums will start to compress as the market gets to higher levels, but for the right assets you'll get good premiums," said Gnodde, who joined Goldman Sachs in 1987 and helped build the firm's European mergers and acquisitions franchise.

Goldman Sachs advised on 414 deals worth a total of $1.07 trillion in 2014, making it once again the top-performing investment bank for M&A volumes, according to Dealogic. The deals generated $2.04 billion of sales for Goldman, meaning the bank was also a world-beater for M&A revenue.