Goldman Sachs Capital Partners

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Goldman Sachs Capital Partners
Type Subsidiary
Industry Private equity
Founded 1986
Headquarters 85 Broad Street
New York City, New York, United States
Products Leveraged buyout, Growth capital
Total assets $39.9 billion
Employees 140+
Parent Goldman Sachs
Website GS Capital Partners

Goldman Sachs Capital Partners is the private equity arm of Goldman Sachs, focused on leveraged buyout and growth capital investments globally.

The group, which is based in New York City, was founded in 1986. GS Capital Partners has raised approximately $39.9 billion since inception across seven funds and has invested over $17 billion. On April 23, 2007, Goldman closed GS Capital Partners VI with $20 billion in committed capital, $11 billion from institutional and high net worth investors and $9 billion from Goldman Sachs and its employees. GS Capital Partners VI is the current primary investment vehicle for Goldman Sachs to make large, privately negotiated equity investments.[1]

History[edit]

Goldman Sachs has historically invested capital in a variety of businesses alongside its investment banking clients. In the early and mid-1980s, Goldman was a slow entrant into the financing of leveraged buyouts and junk bonds and preferred to focus on its traditional mergers and acquisitions advisory business. Beginning in 1983, however, Goldman began making longer-term equity investments in private equity transactions that came through its investment banking and other clients.[2]

Goldman Sachs Capital Partners was founded in 1986, at the same time that similar groups were founded at other investment banks including Lehman Brothers Merchant Banking, Morgan Stanley Capital Partners and DLJ Merchant Banking Partners. Goldman established investment partnerships that allowed its clients to participate alongside the firm in private equity transactions.

Investment funds[edit]

Since 1992, GSCP has raised third party capital as well as investing on behalf of Goldman, its clients and its employees through institutional private equity funds. GSCP's third party investors include pension funds, insurance companies, endowments, fund of funds, high net worth individuals, sovereign wealth funds and other institutional investors.

As of the end of 2008, GSCP had completed fundraising for seven investment funds with total committed capital of approximately US$39.9 billion:

Fund Vintage
Year
Committed
Capital ($m)
GS Capital Partners 1992 $1,104
GS Capital Partners Asia 1994 $300
GS Capital Partners II 1995 $1,750
GS Capital Partners III 1998 $2,780
GS Capital Partners 2000 2000 $5,250
GS Capital Partners V 2005 $8,500
GS Capital Partners VI 2007 $20,300

Source: Preqin[3]

Investments[edit]

GS Capital Partners emerged in the late 1990s as one of the largest private equity investors globally competing and partnering with the largest independent firms, Kohlberg Kravis Roberts, Blackstone Group, Bain Capital, Carlyle Group and TPG Capital. Since the raising of its Goldman Sachs Capital Partners 2000 Fund, GS Capital Partners has completed some of the most notable leveraged buyouts:

Investment Year Company Description Ref.
Burger King 2002 In July 2002, GS Capital Partners, together with TPG Capital and Bain Capital, announced the high profile $2.3 billion leveraged buyout of Burger King from Diageo. However, in November the original transaction collapsed, when Burger King failed to meet certain performance targets. In December 2002, the consortium agreed on a reduced $1.5 billion purchase price for the investment. The consortium had support from Burger King's franchisees, who controlled approximately 92% of Burger King restaurants at the time of the transaction. Under its new owners, Burger King underwent a major brand overhaul including the use of The Burger King character in advertising. In February 2006, Burger King announced plans for an initial public offering. [4][5][6]
SunGard 2005 GS Capital Partners was one of seven private equity firms involved in the buyout of SunGard in a transaction valued at $11.3 billion. GSCP's partners in the acquisition were Silver Lake Partners, Bain Capital, TPG Capital, Kohlberg Kravis Roberts, Providence Equity Partners, and The Blackstone Group. This represented the largest leveraged buyout completed since the takeover of RJR Nabisco at the end of the 1980s leveraged buyout boom. Also, at the time of its announcement, SunGard would be the largest buyout of a technology company in history, a distinction it would cede to the buyout of Freescale Semiconductor. The SunGard transaction is also notable in the number of firms involved in the transaction, the largest club deal completed to that point. The involvement of seven firms in the consortium was criticized by investors in private equity who considered cross-holdings among firms to be generally unattractive. [7][8]
Alltel 2007 GS Capital Partners and TPG Capital announced the acquisition of Alltel Wireless in a $27 billion buyout in May 2007. The transaction was approved by the Federal Communications Commission and closed on November 16, 2007. However just over six months later, on June 5, 2008, Goldman and TPG agreed to sell Alltel to Verizon for slightly more than it had paid for the company amidst a deteriorating economic outlook. [9][10]
Biomet 2007 GS Capital Partners, The Blackstone Group, Kohlberg Kravis Roberts, and TPG Capital acquired the medical devices company for $11.6 billion. [11]
TXU 2007 An investor group of GS Capital Partners, Kohlberg Kravis Roberts and TPG Capital completed the $44.37 billion[12] buyout of the regulated utility and power producer. The investor group had to work closely with ERCOT regulators to gain approval of the transaction but had significant experience with the regulators from their earlier buyout of Texas Genco. TXU is the largest buyout in history, and retained this distinction when the announced buyout of BCE failed to close in December 2008. The deal is also notable for a drastic change in environmental policy for the energy giant, in terms of its carbon emissions from coal power plants and funding alternative energy. [13][14]

In addition to its successful buyout transactions, Goldman was involved in the high profile failed buyout of Harman International Industries (NYSEHAR), an upscale audio equipment maker. On April 26, 2007, Harman announced it had entered an agreement to be acquired by GS Capital Partners and Kohlberg Kravis Roberts.[15] As the financing markets became more adverse in the summer of 2007, the buyout was on tenuous ground. In September 2007, Goldman and KKR backed out of the $8 billion buyout of Harman. By the end of the day, Harman's shares had plummeted by more than 24% on the news.

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