Goldman Sachs Case
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Goldman Sachs Group
Topic: Initial Public Offering
Report Format
I. Statement of the Problem
II. Alternative Solutions
III. Analysis of Alternative
IV. Final Recommendations
V. Appendix
I. Statement of the Problem
If the firm remains a partnership could the firm continue to compete on an equal footing with its competitors, would they be able to retain key employees? How would tangible as well as intangible assets be valued in its stock price as a public firm?
Problem: What initial public offering valuation would be most appropriate for Goldman Sachs & Co. to use?
II. Alternative Solutions 1. Industry Comparables 2. DCF model
III. Analysis of Alternatives In order to compare Goldman Sachs to companies in its industry the information in Exhibit 2 of the case has to be used. A way to compare the information given to Goldman Sachs is to find the average of the comparable companies’ information to use it to find an approximate IPO for Goldman Sachs. The average of the price to book value ratios and the average of the price per earnings ratio would be are calculations that can be found in order to compare Goldman Sachs to its competitors. The average for the price to book ratio that was found came out to be 3.12 and the price per earnings ratio came out to be 18.38. These numbers would be good to use as approximations for Goldman Sachs values. In order to find estimated stock prices the price to book ratio should be multiplied by the book value per share that was given. This would give a price of $48.80 for Goldman Sachs. Another estimated stock price could be found by multiplying the average price per earnings by the earnings per share that was given. This would give an estimated stock price of $62.86. The average of these two numbers would give a better estimate and that came out to be $55.83 which can be used as the estimate for what the IPO should be for Goldman Sachs. In order to do a discounted cash flow model you have to
Goldman Sachs Group
Topic: Initial Public Offering
Report Format
I. Statement of the Problem
II. Alternative Solutions
III. Analysis of Alternative
IV. Final Recommendations
V. Appendix
I. Statement of the Problem
If the firm remains a partnership could the firm continue to compete on an equal footing with its competitors, would they be able to retain key employees? How would tangible as well as intangible assets be valued in its stock price as a public firm?
Problem: What initial public offering valuation would be most appropriate for Goldman Sachs & Co. to use?
II. Alternative Solutions 1. Industry Comparables 2. DCF model
III. Analysis of Alternatives In order to compare Goldman Sachs to companies in its industry the information in Exhibit 2 of the case has to be used. A way to compare the information given to Goldman Sachs is to find the average of the comparable companies’ information to use it to find an approximate IPO for Goldman Sachs. The average of the price to book value ratios and the average of the price per earnings ratio would be are calculations that can be found in order to compare Goldman Sachs to its competitors. The average for the price to book ratio that was found came out to be 3.12 and the price per earnings ratio came out to be 18.38. These numbers would be good to use as approximations for Goldman Sachs values. In order to find estimated stock prices the price to book ratio should be multiplied by the book value per share that was given. This would give a price of $48.80 for Goldman Sachs. Another estimated stock price could be found by multiplying the average price per earnings by the earnings per share that was given. This would give an estimated stock price of $62.86. The average of these two numbers would give a better estimate and that came out to be $55.83 which can be used as the estimate for what the IPO should be for Goldman Sachs. In order to do a discounted cash flow model you have to