Will Goldman Sachs Ever Buy Full Control Of Its Australian Joint Venture
Every couple of years the rumour mill begins with speculation that investment banking powerhouse Goldman Sachs will buy the 55 per cent stake in its Australian joint venture Goldman Sachs & Partners that it does not own.
The reason for the two year cycle, according to a report in The Australian is that it coincides with a 90 day window of opportunity for Goldman’s to discuss the stake sale with its domestic joint venture’s 120 plus shareholders.
The arrangement is part of the deal that was negotiated when Goldman acquired its 45 per cent stake in 2003, and was designed to allow both stake holders to regularly review their Australian business.
Despite what many of Goldman rivals actually believe, the window of opportunity for the time being has closed, and the shareholding structure will continue as before.
The fact that for now there is no change in ownership, does not preclude that in the future Goldman will not pursue seeking full ownership of its Australian operations. Goldman Sachs executives have always had a cordial relationship with the management of its Australian joint venture, most of whom are now in fact from Goldman Sachs, which means there is no reason why a sale could not take place outside the traditional window of opportunity.
Australia is the only market which Goldman Sachs operates in where it does not exert 100 per cent control of its entity, and whilst an outright sale to the investment bank would make little difference to its Australian capital markets or M&A operations which are already well integrated with Goldman Sachs globally, full ownership would gives its sales and trading operation access to larger balance sheet funding.
In the immediate aftermath of the financial crisis, it was always unlikely that Goldman’s would initiate a stake sale or enter acquisition mode, but as the recovery builds momentum assessing its options is certainly much more realistic.
Despite the number of reasons for Goldman’s to initiate a full takeover, it may be still be reluctant to do a deal fearing it may upset key executives who already run a successful business franchise by appearing to take over full management control.
The deciding factor, of course, will be price.
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