Goldman Considered Buying a Boutique in Mid-Market Push

(Bloomberg) -- How serious is Goldman Sachs about its un-Goldmanlike push to handle more deals for smaller companies? Last year, it considered an unusual takeover of its own.

Bankers at the Wall Street firm debated buying a boutique investment bank catering to midsize corporations to ramp up Goldman’s share of that market, according to people with knowledge of the matter. At one point, executives discussed a link-up with Chicago-based William Blair & Co. They also internally raised the possibility of buying Harris Williams & Co., owned by PNC Financial Services Group Inc., one of the people said, asking not to be identified because the information isn’t public.

The talks with William Blair early last year ultimately broke off, the people said. A representative for New York-based Goldman Sachs Group Inc. declined to comment.

“William Blair’s executive committee was never in discussions with Goldman Sachs about a takeover,” said Tony Zimmer, a spokesman for the firm. “We are not in the market to be sold.”

Marcey Zwiebel, a spokeswoman for PNC, said Harris Williams is not for sale.

Goldman Sachs, long renowned for catering to the world’s largest investors and corporations, is looking to sell more services to midsize companies under a plan to generate $5 billion in additional revenue. It’s a big cultural shift for an elite firm whose dealmakers and corporate bankers have for much of its 150-year history prided themselves on chasing the most lucrative transactions.

Chief Executive Officer David Solomon, who took over in October, reiterated his intent to expand the bank’s client base when he addressed investors Tuesday.

“We kind of re-examined our footprint globally, and our footprint isn’t as broad as it should be,” he said. “There are lots and lots of companies” worth $500 million to $3 billion that have never been served by Goldman, he said.

On Wednesday, Solomon told CNBC he wasn’t aware of talks to buy a boutique. He emphasized that the firm can expand its customer base “organically, by adding bankers and building out our ability to cover a broader array of companies.”

Goldman is also expanding the services it offers. For example, it’s working on a new platform for processing corporations’ cash. While it will begin by serving multinational clients, the aim is to eventually offer it to smaller companies too.

Smaller Deals

Goldman laid out a series of initiatives in September 2017 to boost revenue, in part by expanding operations previously seen as sidelines. Besides offering more services and financing to midsize companies, it’s accepting deposits and offering loans to consumers online. The push is making Goldman look more like a traditional bank, though many of its initiatives lean heavily on technology rather than, say, branches and tellers.

In 2018, the bank ranked as the world’s top adviser on mergers and acquisitions, helped in part by a strategy of courting smaller clients and buyout firms. While its average deal value has decreased since 2015, it stayed ahead by handling more transactions.

William Blair, founded in 1935, offers a range of services including investment banking, private wealth management and research, according to its website. Harris Williams specializes in advisory work and capital-markets services for midsize companies. PNC acquired it in 2005.

That Goldman would even consider buying a smaller investment bank would have been almost unthinkable in the recent past. Now, senior management has shown itself more willing to shed the firm’s big-business mystique to scrounge for new sources of revenue.

It’s also a sign of how far Wall Street banks have come since the dark days of 2008 as fears about too-big-to-fail enterprises give way to optimism and new tie-ups. Just this week, Morgan Stanley announced its biggest takeover since the financial crisis.

©2019 Bloomberg L.P.