Most buyout firms have traditionally chipped in a relatively small percentage of a vehicle's total capital, usually less than 10% and often as low as 2%. The private equity arm of Goldman Sachs, though, isn't like most buyout firms. It made that fact clear 12 years ago today, when it closed one of the signature PE mega-funds of pre-crisis boom times, a $20 billion monster that also included a staggering amount of the investment bank's own cash.
How much, exactly? GS Capital Partners VI included $9 billion in commitments from Goldman and its employees, which would have made for one of the year's biggest funds even if it didn't also include another $11 billion from outside investors. The $20 billion total was far and away the largest fund in Goldman's history, more than doubling the size of an $8.5 billion predecessor (which "only" included $2.5 billion from the firm itself)—an indication of the storied bank's increased ambitions in the buyout space.
Shortly after closing the fund, Goldman completed a deal that served as another example of those ambitions—and of its differences from some of the LBO world's other major operators. In May 2007, pipeline power Kinder Morgan went private in a $15.2 billion deal backed by Goldman, company co-founder Rich Kinder and several other co-investors, including The Carlyle Group. In addition to investing in the deal, a Goldman banker reportedly worked as an advisor and Goldman took the lead on arranging a $7.3 billion debt package, showing the full array of the bank's financial services and prompting discussions about potential conflicts of interest.
In the coming months, Goldman continued to put its Fund VI to work by co-investing in a series of other billion-dollar deals. It teamed with Mediaset to acquire Dutch TV company Endemol in a takeover worth €2.63 billion (about $3.55 billion at the time). It partnered with Madrone Capital Partners to invest $1 billion in Hyatt. And in the biggest move of all, Goldman and TPG Capital combined to purchase now-defunct wireless operator Alltel in a take-private pact worth $25 billion.
But in retrospect, of course, 2007 was probably not the best year to raise a massive fund and embark on a buyout spree. Within a year, chaos had descended upon the financial world, with the dual effects of driving down return multiples across the industry and reducing access to the sort of debt packages usually required to conduct truly massive takeovers. The ensuing climate made it exceedingly difficult for Goldman's mega-fund to generate the sort of profits it had surely hoped for.
The financial crisis helped create many changes in how Goldman does its business. For our purposes, though, perhaps the most important one was that it brought the bank's buyout ambitions back down to earth. So far, at least, GS Capital Partners VI has proven to be Goldman's only foray into the land of $10 billion buyout funds; in fact, it would be 10 years before Goldman raised another buyout fund of any significant size, a vehicle called West Street Capital Partners VII, which closed on a reported $7 billion in 2017.
As you can see, while the numbering of that vehicle seems to indicate it belongs in the same series as GS Capital Partners VI, the naming and branding is now different. Which is perhaps the best sign that Goldman is quite happy that the biggest buyout fund in its history, a vehicle that didn't turn out quite how the bank hoped, is now just that: history.
Related read: Meet the $10B buyout fund club