Goldman Sachs backs away from hostile takeovers
By Bryce Elder
Goldman Sachs, the world’s leading mergers adviser, is shying away from financing hostile takeovers to avoid a backlash over possible conflicts of interest.
Hank Paulson, Goldman's chief executive, is said to have told executives at the firm to think carefully before funding unsolicited transactions.
Mr Paulson's warning comes after Goldman played a key part in all four of the UK's largest recent takeover approaches. Heathrow operator BAA this week rejected a £9.4 billion unsolicited bid offer led by Goldman, while deals it was financing for buyouts of ITV and AB Ports have also been spurned.
Most controversially, the Wall Street bank financed a move for All Bar One owner Mitchells & Butlers, where it was acting both as the financial advisor and the funding provider.
Concerned that such a deal could damage its standing with corporate clients, Mr Paulson reportedly personally vetoed a hostile offer for the pubs group.
Private equity investments and proprietary trading divisions provide about two-thirds of the Wall Street bank's revenue. Goldman Sachs Capital Partners, its venture capital arm, was the highest ranked private equity house by revenue in the first quarter this year, according to data compiled by Dealogic.
But investment banks are finding it increasingly difficult to find uses for the billions of pounds they have raised from pension providers over recent years. Goldman's own infrastructure investment fund behind the BAA and AB Ports offers, run by Bill Young, has yet to complete a single major deal.
Other investment banks have stepped back from the business of private equity in order to avoid such problems. Morgan Stanley and Deutsche Bank have both spun off their buyout arms, while JP Morgan Chase plans this year to split its JP Morgan Partners unit into an independent firm later this year.
But Goldman has a reputation for being able to handle potential conflicts between its role as an adviser and its own investment activities. And the US bank has so far shown no intention to step back from the business of principal investing, announcing a year ago that it had raised an $8.5 billion (£4.78 billion) for a new private equity fund.
|
