By
Godfrey Benjamin
May 13th, 2024
Goldman Sachs has endured from losses from trying to cater to the broader market and is now looking to sell its investment advisor.
Leading global investment banking and financial services company Goldman Sachs (NYSE: GS) is considering selling its investment advisory business. According to a Financial Times report, Goldman is “currently evaluating alternatives” for the company, which operates as a financial manager and investment adviser with assets worth about $29 billion.
Goldman Sachs says it hopes to find a solution that would be mutually beneficial for advisers and clients. The business expanded from United Capital, an investment firm Goldman purchased in 2019 for $750 million.
For the most part, Goldman typically catered to high-net-worth clients for its wealth management operations. Purchasing United Capital four years ago was Goldman’s attempt to reach a wide range of customers, especially those who are not high net-worth clients.
Unfortunately, Goldman has suffered losses as it pushed into broader investment advisory. This has put pressure on CEO David Solomon, who is now seeking to dispose of the investment arm. Notably, Goldman Sachs is looking to do away with its investment business at a time when the market is recording a lot of job switching among registered experts in the advisory field. Many of these persons are now moving to specialized outfits or launching their own businesses. These persons are also seemingly eager to take their clients along.
Goldman Sachs to Sell GreenSky along with Investment Advisory Business
Solomon is also trying to sell its specialty lender GreenSky. Founded in 2006, the company helps consumers get home improvement loans. GreenSky raised $874 million after going public in 2018 with Goldman Sachs as the lead underwriter. Goldman then acquired the company in 2022 to join its consumer banking business.
As part of its Q2 earnings announcement, Goldman said GreenSky suffered a $504 million write-down, plus $485 million in impairments connected to the company’s real estate investments.
People familiar with the matter have said that investment firm Sixth Street is leading a group of companies looking to take over GreenSky from Goldman. The group includes PIMCO, KKR, and CardWorks. The people also said Apollo Global Management is also trying to buy GreenSky in separate efforts. According to these people, Goldman might consider selling the platform and loan book to different parties. There’s also the possibility that Goldman could keep the loan book and only sell the platform. One of the parties said that the proposals are between $500 million and $1 billion. Other reports say the bids are about half of Goldman’s purchasing price at the time it acquired GreenSky.
The early GreenSky valuation in 2021 was $2.24 billion. However, the valuation eventually fell to $1.7 billion when the transaction was complete. After two rounds of bidding, the people familiar with the matter have said another round is unlikely.
Goldman had tried to buy GreenSky at a $7 per share price or $1.3 billion cash offer. However, GreenSky canceled the process after Goldman refused to raise its bid.