Goldman Sachs IPO Case
Business Financial Policy & Strategy Case Analysis:
I. Statement of the Problem:
In 1882, a partnership was formed between Marcus Goldman and his son in law Sam Sachs to create the financial services firm Goldman Sachs & Co. Due to the strategic management; Goldman quickly grew to become a major commercial paper dealer and eventually would become the market’s leader. Goldman began experiencing exponential success over the years with over 190 partners, 13,000 employees by 1998. However, although it was experiencing success, skeptical speculations begin to arise about Goldman’s ability to maintain its place as market leader considering its competitors issues IPO’s over a decade ago. Goldman being a partnership limited the amount of capital that could be raised due to the equity invested and earnings. In addition, partnerships were very vulnerable to large capital drain if significant numbers of partners depart during a downturn in the economy. Also due to Goldman dominating the market for M&A on a global basis, it increased the amount of financing needed internationally and as result built strong relationships with European banks. Goldman’s rapid expansion globally also required a higher level of liquidity that may not always be able to be achieved with the current financing as a privately held company. Goldman is now faced with the stark decision of whether or not an IPO would be the next plan of action for the company.
II. Alternative Solutions:
1. Comparable Companies Analysis
2. Shelf registration
III. Analysis of Alternatives:
Comparable Companies Analysis
A logical approach to determining the price of Goldman’s IPO is the Comparable Company Analysis. It essentially is a process used to evaluate the value of a company using the metrics of other businesses of similar size in the same industry. In this study, our comparable companies included Morgan Stanley, Merrill Lynch, Leman Brothers, and Bears sterns which
I. Statement of the Problem:
In 1882, a partnership was formed between Marcus Goldman and his son in law Sam Sachs to create the financial services firm Goldman Sachs & Co. Due to the strategic management; Goldman quickly grew to become a major commercial paper dealer and eventually would become the market’s leader. Goldman began experiencing exponential success over the years with over 190 partners, 13,000 employees by 1998. However, although it was experiencing success, skeptical speculations begin to arise about Goldman’s ability to maintain its place as market leader considering its competitors issues IPO’s over a decade ago. Goldman being a partnership limited the amount of capital that could be raised due to the equity invested and earnings. In addition, partnerships were very vulnerable to large capital drain if significant numbers of partners depart during a downturn in the economy. Also due to Goldman dominating the market for M&A on a global basis, it increased the amount of financing needed internationally and as result built strong relationships with European banks. Goldman’s rapid expansion globally also required a higher level of liquidity that may not always be able to be achieved with the current financing as a privately held company. Goldman is now faced with the stark decision of whether or not an IPO would be the next plan of action for the company.
II. Alternative Solutions:
1. Comparable Companies Analysis
2. Shelf registration
III. Analysis of Alternatives:
Comparable Companies Analysis
A logical approach to determining the price of Goldman’s IPO is the Comparable Company Analysis. It essentially is a process used to evaluate the value of a company using the metrics of other businesses of similar size in the same industry. In this study, our comparable companies included Morgan Stanley, Merrill Lynch, Leman Brothers, and Bears sterns which