Goldman Sachs, Citi agree: M&A surge set to continue

Adam Jeffery | CNBC

The surge in corporate mergers and acquisitions isn't likely to subside anytime soon, according to two senior bankers from Goldman Sachs and Citigoup.

"As long as the environment is benign enough to reward that—and we're in a benign environment with respect to risk—you can make a strong argument that this activity will continue and potentially accelerate," David Solomon, co-head of investment banking at Goldman Sachs, said Tuesday at the Milken Institute Global Conference in Los Angeles.

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Solomon said cheap money from ultralow interest rates isn't the only reason for the high volume of M&A.

"It's accelerated some things," Solomon said. "But at the end of the day, I don't think that the cost of capital is really driving activity as much as the strategic desire to find ways to grow."

Ray McGuire, global head of corporate and investment banking at Citi, added that interest rates aren't likely to rise enough to disrupt the trend.

"In order for there to be a dislocation of the market as a result of that move, they'd have to move pretty considerably," McGuire said of a potential Federal Reserve rate increase.

"It's not clear there's enough strength in the global economy, in the U.S. economy, for them to make a move that is that material to disrupt the overall market confidence."

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Goldman's Solomon also noted that CEOs are wired to expand their businesses.

"The fact is that confidence is high and people are going to move out the risk curve ... to support that need to grow and to move forward," he said. "It's natural human nature for CEOs."

Solomon did offer some caution.

The Fed is unlikely to move rates so high in the near term that it affects M&A, he said, but Solomon noted that it's hard to predict the market's reaction over time.

"To say that we're gong to go through a shift and there's not a possibility that volatility and confidence breaks down and could affect M&A activity, on the distribution of outcomes, I think there's a big chunk of outcomes where that's possible," explained Solomon.

"I wouldn't say that's likely, but there's a big chunk of outcomes where it's possible."