As we all know by now, Goldman Sachs is in a rut. The bank's biggest money engine, its trading arm, can't scare up enough business. As a result, revenues have stalled. Part of this problem is specific to Goldman – other Wall Street banks have managed just fine in recent quarters – but part of it is industrywide. To make money off its clients, Goldman needs them to seek out its services in the first place. But before clients come knocking, at Goldman or anywhere, they have to have ideas. And unlike investable capital, that's a resource in low supply of late.
So Goldman is going beyond its other efforts at shoring up revenue – cross-selling, hawking bitcoin, etc – to address the source of the problem directly. If you supply the cash, Goldman will supply the ideas:
The Wall Street bank is forming a group, known internally as the Innovation Lab, focused on generating compelling deal ideas for companies like Warren Buffett’s conglomerate Berkshire Hathaway or Japan’s SoftBank Group's $93 billion investment fund, people familiar with the matter said. [...]
The group is expected to come up with out-of-the box ideas and focus on clients who want to acquire or make big investments in businesses across industries, and do not fit neatly into individual categories, like technology or industrials, that sector bankers already cover.
At first glance the move might seem like a minor fuck-you to all those prospective clients whose job description happens to be exactly what Goldman is trying to peddle here. If you're, say, Rajeev Misra, the ex-Deutsche trader who now heads SoftBank's strategic finance arm, you might not appreciate the idea of a global investment bank marketing a product that does what you're supposed to do, only better and cheaper and perhaps tastier.
But Goldman really does have something the Rajeev Misras of the world don't: access. If this is part of Lloyd Blankfein's slightly eyebrow-raising effort to get bankers from different units working together to generate new prospects, the move makes a lot of sense. It's easier to whip up M&A ideas for hungry investment funds when you play tennis ever week with the I-banker whose clients are these potential M&A targets.
That still doesn't necessarily solve the threat this poses to investment fund idea guys. The most important part of their jobs (like any) is justifying their existence to superiors. If the answer to “where'd you get this brilliant pitch?” is “some Goldman guy,” the fund manager is going to wonder what he's paying for exactly.