Goldman Sachs has reportedly told employees it plans to combine its four alternative investing strategies into a private investment division that will have roughly $140 billion in AUM. That includes the New York firm's massive merchant banking arm, which already employs about $100 billion for PE and credit deals, along with its special situations group ($30 billion AUM), a strategic investing group that backs fintech startups and a real estate investing division, per reports.
In conjunction with the move, Goldman is expected to undergo a "fundraising blitz" with possible plans to raise a real estate and buyout fund this year as well, per The Wall Street Journal. That could potentially put Goldman in the same league as other diversified public buyout shops such as KKR, which had around $200 billion in AUM at the time of its 1Q earnings report. But it also introduces a potential conflict since Goldman often provides IPO underwriting services and loans to private equity firms it could now be competing against more openly.
Private equity investing isn't new to Goldman. The firm's merchant banking division dates back to 1986 with some $155 billion in total capital invested. Last year, its merchant banking division was involved in 21 PE deals, according to the PitchBook Platform. And they've already been involved in five so far this year. The biggest came earlier this month when the unit agreed to purchase optometry chain operator Capital Vision Services from Altas Partners and Caisse de dépôt et placement du Quebec for a reported enterprise value of $2.7 billion.
In addition, Goldman Sachs' Petershill unit specializes in buying up stakes in other alternative asset managers and has already backed Navab Capital Partners, Harvest Partners and others. Last month, the division was said to be seeking $4 billion for another fund, per Bloomberg.
The push into PE comes after Goldman CEO David Solomon took over in October and subsequently ordered a review of the firm's alternative investing unit in hopes of boosting the bank's stock performance. In April, the bank appointed Sumit Rajpal and Andrew Wolff to take over the PE division, with partner Rich Friedman stepping down from day-to-day activities. Goldman missed its overall revenue estimates in 1Q and its share price has dropped nearly 18% over the past year, dropping its market cap to around $70 billion.
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