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Goldman Looks For $20 Billion LBO Fund

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Goldman Sachs announced a giant buyout fund Tuesday, perhaps providing an answer to a bid question on the lips of Wall Street gossips: why was Goldman notably absent from the list of banks underwriting the initial public offering of private equity giant Blackstone. Yesterday Goldman Sachs chief executive Loyd Blankfein said the firm’s new buyout fund might garner as much as $20 billion. This would means Goldman will be looking to raise funds from investors looking to profit from the recent boom in the buyout business at the same time the Blackstone Group is hitting the public markets with its offering.
Could this conflict be what kept Goldman out of the Blackstone IPO? While the conflict is not formally direct—Goldman will presumably raise funds for its latest fund from institutions and other large investors while Blackstone’s offering has a potentially broader market, including public investors—in practice they are probably competing for the attention of many of the same investors. Participants in headline making initial public offerings tend to be the institutional players, hedge funds and wealthy individuals that Goldman would hit up for its new fund. Underwriting Blackstone while running a fundraising operation for other could certainly create some awkward, unseemly moments.
If Goldman were underwriting the Blackstone IPO, you can imagine the roadshow where potential investors asked the Blackstone’s Goldman underwriting team why they should invest in the Blackstone IPO instead of Goldman’s own fund.
Goldman has been notoriously creative in handling conflicts of interest but this may have stretched the imaginations of even the cleverest boys in its client relationship business.
Private equity funds are clearly hearing the sound of this particular trumpet this morning. It announces that their push into the territory traditionally controlled by Wall Street’s banks—notably in investment banking services and real estate investment—is not going unanswered. Under John Mack, Morgan Stanley has pushed aggressively into hedge funds and private equity, through acquisitions and internal reforms. And now Goldman steps directly into Blackstone’s path.
Game on.
Goldman Aims for $20 Billion Buyout Fund [DealBook]
Goldman's Buyout Fund May Top $20 Billion, CEO Says
Goldman CEO says new LBO fund could exceed $20 bln [Reuters]
[Goldman Sachs could not immediately be reached for comment on this kind of irresponsible speculation. ]