Bank for Financial Sponsors: Goldman Sachs

IFR Awards 2018
8 min read
Steve Slater, Gareth Gore

Family fortunes

With private equity and strategic investors fast growing in importance, Goldman Sachs has shown its ability to adapt and innovate to serve its clients. For its never-ending innovation, breadth of expertise and commitment to the industry, Goldman Sachs is IFR’s Bank of the Year for Financial Sponsors.

When you’re at the top of your game, it’s easy to become complacent. After a record-breaking year in 2017 for its financial and strategic investors group, for which it won IFR’s inaugural Bank of the Year for Financial Sponsors award, it would have been rather understandable if Goldman Sachs had decided to just leave the business be.

But if anything has driven the success of the FSIG business over the past 15 years, it is a constant ability to spot new opportunities – for its clients, and for itself. And so, as 2018 began, the group was already working on its latest set of initiatives to ensure that it remained at the top, whether that be in generating investment ideas, financing deals, or boosting its own share of the wallet.

“It’s actually mind-blowing when we think what the opportunities are for this business,” said Alison Mass, global head of FSIG. “We really are the firm that drives this market, and I think we drive change in the market. We feel like a lot of firms fall in behind us because a lot of what we do is obvious – once we do it.”

Conscious of the ever-expanding tentacles of its private equity and strategic investor clients, this year Goldman launched a new initiative to deepen its coverage of sponsor portfolio companies, especially those valued at less than US$2bn that often fall off banks’ radars once they are taken private. To achieve that, FSIG doubled its own coverage team, which sits apart from Goldman’s other coverage bankers.

“They are not an M&A person, they are not a sponsor coverage person where they are covering Blackstone, or KKR or Carlyle,” said David Friedland, global head of FSIG’s mergers and acquisitions group. “They cover the CEOs and management teams of the actual sponsor portfolio companies within an industry vertical.”


In the past year alone, Goldman has increased its coverage of such sponsor portfolio companies by more than 500 entities. Monitoring these companies closely and building relationships with management – after many of Goldman’s rivals had moved on – has helped generate a huge amount of ancillary business for the bank, with bolt-on M&A, financing, advisory and exit potential constantly identified by dedicated bankers.

“In the industry groups, it all skews towards the larger companies,” added Friedland. “If they have a list of companies of US$10bn and up, and another list of US$10bn and below, you know where the emphasis is going to go. So how do we make sure that these sponsor portfolio companies get all the attention they are supposed to do? The set-up we have is pretty unique.”

Pulse Electronics, which was taken private by Oaktree Capital Management three years ago, is a prime example of where the set-up has worked. The company would normally fall between the gaps of tech and industrials coverage teams. But a new FSIG coverage hire identified the company as having potential. Within months, it engineered the sale of Pulse to Taiwanese manufacturer Yageo for US$740m.

Another initiative has been the build-out of the business’ family office coverage. The £2bn purchase from KKR of schools operator Cognita by the Jacobs family of Switzerland is illustrative of the growing importance of family offices in the strategic investment space. Goldman was lead-left on the £800m debt package behind the deal, which went to syndication just as the awards period considered by IFR was coming to an end.

For the bank, the mandate on the Cognita deal was the culmination of a highly successful year in serving its family office clients. Goldman also advised Sirva, the removal company part-owned by Sam Zell’s Equity Group Investments, on its sale to Madison Dearborn Partners. The bank also advised US Security Associates on its sale to Allied Universal, which is owned in part by the Wendel family.


But the year hasn’t just been about deepening its client base. The FSIG team has also been hard at work bringing ideas, financing, advising and helping arrange exits for long-running clients. During 2018 it was involved in almost every one of the biggest deals of the year – the US$17bn carve-out of Refinitiv, the US$12bn leveraged buyout of Global Logistic Properties and the US$9bn LBO of Envision Healthcare.

Goldman’s closeness to the sellside is often its key calling card for strategic investors, who are mainly in the market for ideas. Over the past year, Goldman was sellside adviser on a third of all deals. It was adviser to Toshiba on the US$18bn sale of its memory business to Bain, to SkyBet and its owner CVC on its £3.4bn sale, and to Cotiviti on its US$4.9bn sale to a Veritas Capital fund.

“Hands down we have the strongest sellside M&A business on the Street,” said Mass. ”We are adviser to corporations, we are also adviser to the financial sponsor community, but if you talk to them they would say that part of the reason they love working with us is because we have the most interesting and largest breadth of corporate sell-side which they want to buy.”

During a year where loan markets have started to show some problems digesting huge volumes of LBO financings, and where high-yield markets have started to become more picky, Goldman has often stepped in with its own money – provided by its merchant bank – showing its commitment to clients even during the most volatile part of the year.

“When an idea presents itself – a client looking at doing a recap or acquisition – we work collaboratively to get the best solution for the client, full stop,” said Mass. “There are times where the private credit option is very valuable: they come in, they own it, there is no distribution. There are certain market times where that is a huge advantage.”

According to the bank, such financing was provided in Bridgepoint’s acquisition of Humanetics, and Leonard Green’s acquisition of ProMach. Terms weren’t provided in either case. The merchant bank also stepped in to support a €2.2bn debt refinancing from sponsor-backed Italian payments company Nexi, which enabled the company to halve its funding costs.

“Yes, we were one of the banks leading the financing, but we also provided a very substantial principal investment into the company,” said Rob Pulford, head of FSIG in EMEA. “In a world where leverage is high and the multiples are high, putting preferred equity between the debt and the equity can often be a tool that the client wants – and very few people can do that.”


On the exit side, the bank was present on many of the year’s biggest deals. It was lead bookrunner and stabilisation agent on iQIYI’s US$2.3bn IPO in March, senior active bookrunner on ADT’s US$1.5bn IPO in January, lead-left bookrunner on GreenSky’s US$870m listing in May and joint global coordinator on Aston Martin Lagonda’s £1.4bn IPO in October.

And after another bumper year, the team is already setting its sights on 2019, with seven new initiatives already in the works to build on the progress it has made this year.

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Bank for Financial Sponsors: Goldman Sachs