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Public ()
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Our clients' interests always come first
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1869
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New York, New York
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Lloyd Blankfein , Chairman & CEO<br /> Gary Cohn , President & COO<br /> Jon Winkelried , President and COO<br />Suzanne M Nora Johnson, Vice Chairman<br /> David A Viniar, CFO<br />Edward C Forst, CAO <br/> Gregory K Palm, General Counsel <br /> Esta E Stecher, General Counsel <br /> Kevin W Kennedy, Head of Human Capital Management <br> Alan M Cohen, Global Head of Compliance
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30,335 ( 2006 )
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Finance And Insurance
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Investment Banking
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US $ 3767 Billion ( 2006 )
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US $ 954 Billion ( 2006 )
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, or simply '''Goldman Sachs''' () is one of the world's largest global
Investment Banks . Goldman Sachs was founded in
1869 , and is headquartered in the
Lower Manhattan area of
New York City at 85 Broad Street.
1 Goldman Sachs has offices in leading financial centers such as
New York City ,
London ,
Chicago ,
Los Angeles ,
San Francisco ,
Frankfurt ,
Zürich ,
Paris ,
São Paulo ,
Bangalore ,
Mumbai ,
Hong Kong ,
Beijing ,
Singapore ,
Salt Lake City ,
Sydney ,
Dubai ,
Milan ,
Melbourne ,
Tokyo ,
Taipei ,
Moscow and
Toronto .
Goldman Sachs acts as a
Financial Advisor to some of the most important companies, largest governments, and wealthiest families in the world. It is a
Primary Dealer in the U.S. Treasury securities market. Goldman Sachs offers its clients mergers & acquisitions advisory, provides
Underwriting services, engages in
Proprietary Trading , invests in
Private Equity deals, and also manages the wealth of affluent individuals and families.
Goldman Sachs was founded in
1869 by
German Jewish immigrant
Marcus Goldman .
2 The company made a name for itself pioneering the use of
Commercial Paper for entrepreneurs and was invited to join the
New York Stock Exchange in 1896. It was during this time that Goldman's son-in-law
Samuel Sachs joined the firm which prompted the name change to Goldman Sachs.
In the early
20th Century , Goldman was a major player in establishing the
Initial Public Offering market. It managed one of the largest IPO's to date, that of
Sears, Roebuck And Company in 1906. It also became one of the first companies to heavily recruit those with
MBA degrees from leading Business Schools, a practice that still continues today.
In 1929, it launched the Goldman Sachs Trading Corp., a closed-end mutual fund with characteristics similar to that of a
Ponzi Scheme . The fund failed as a result of the
Stock Market Crash Of 1929 , hurting the firm's reputation for several years afterward.
3
In 1930,
Sidney Weinberg assumed the role of Senior Partner and shifted Goldman's focus away from Trading and towards
Investment Banking . It was Weinberg's actions that helped to restore some of Goldman's tarnished reputation. On the back of Weinberg, Goldman was lead advisor on the
Ford Motor Company's IPO in 1956, which at the time was a major
Coup on Wall Street. Under Weinberg's reign the Firm also started an Investment Research division and a
Municipal Bond department. It also was at this time that the firm became an early innovator in
Risk Arbitrage .
Gus Levy joined the firm in the 1950s as a well known securities trader, which started a trend at Goldman where there would be two powers generally vie for supremacy, one from investment banking and one from securities trading. For most of the 1950s and 1960's, this would be Weinberg and Levy. Levy was a pioneer in
Block Trading and the firm established this trend under his guidance. Due to Weinberg's heavy influence at the firm, it formed an Investment Banking Division in 1956 in an attempt to spread around influence and not focus it all on Weinberg.
In 1969, Levy took over as Senior Partner from Weinberg, and built Goldman's trading franchise once again. It is Levy who is credited with Goldman's famous philosophy of being "long term greedy," which implies that as long as money is made over the long term, trading losses in the short term are not to be worried about. That same year, Weinberg retired from the firm.
Another financial crisis for the firm occurred in 1970, when the
Penn Central Railroad Company went
Bankrupt with over $80 million in commercial paper outstanding, most of it issued by Goldman Sachs. The bankruptcy was large, and the resulting lawsuits threatened the partnership capital and life of the firm. It was this bankruptcy that resulted in
Credit Rating s being created for every issuer of commercial paper today by several credit rating services.
4
During the 1970s, the firm also expanded in several ways. Under the direction of Senior Partner Stanley R. Miller, it opened its first international office in
London in 1970, and created a
Private Wealth division along with a
Fixed Income division in 1972. It also pioneered the "
White Knight " strategy in
1974 during its attempts to defend Electric Storage Battery against a hostile
Takeover bid from International Nickel and Goldman's rival
Morgan Stanley .
5 This action would boost the firm's reputation as an investment adviser because it pledged to no longer participate in hostile takeovers.
John Weinberg (the son of Sidney Weinberg), and
John C. Whitehead assumed roles of Co-Senior Partners in
1976 , once again emphasizing the co-leadership at the firm. One of their most famous initiatives was the establishment of the 14 Business Principles
6 that are still used to this day.
In the 1980s, the firm made a major move by acquiring J. Aron & Company, a
Commodities Trading firm which merged with the Fixed Income division to become known as Fixed Income, Currencies, and Commodities. J. Aron was a major player in the coffee and gold markets, and the current CEO of Goldman,
Lloyd Blankfein , joined the firm as a result of this merger. In 1985 it underwrote the public offering of the
Real Estate Investment Trust that owned
Rockefeller Center , then the largest
REIT offering in history. In accordance with the beginning of the
Collapse Of The Soviet Union , the firm also became largely involved in facilitating the global
Privatization movement by advising companies that were spinning off from their parent governments.
In 1986, the firm formed Goldman Sachs
Asset Management , which manages the majority of its
Mutual Fund s and
Hedge Fund s today. In the same year, the firm also underwrote the IPO of
Microsoft , advised
General Electric on its acquisition of
RCA and joined the
London and
Tokyo Stock Exchange s. 1986 also was the year when Goldman became the first United States bank to rank in the top 10 of Mergers and Acquisitions in the
United Kingdom . During the 1980s the firm became the first bank to distribute its investment research electronically and created the first public offering of original issue deep-discount bond.
Robert Rubin and
Stephen Friedman assumed the Co-Senior Partnership in 1990 and pledged to focus on
Globalization of the firm and strengthening the Merger & Acquisition and Trading business lines. During their reign, the firm introduced paperless trading to the New York Stock exchange and lead-managed the first-ever global
Debt Offering by a U.S. corporation. It also launched the
Goldman Sachs Commodity Index (GSCI) and opened a
Beijing office in 1994. It was this same year that
Jon Corzine assumed leadership of the firm following the departure of Rubin and Friedman. The firm joined
David Rockefeller and partners in a 50-50 join ownership of
Rockefeller Center during 1994, but later sold the shares to
Tishman Speyer in 2000. In 1996, Goldman was lead underwriter of the
Yahoo! IPO and in 1998 it was global coordinator of the
NTT DoCoMo IPO. In 1999, Henry Paulson took over as Senior Partner.
One of the largest events in the firm's history was its own IPO in 1999. The decision to go public was a tough one that the partners debated for decades. In the end, Goldman decided to offer only a small portion of the company to the public, with some 48% still held by the partnership pool.
7 22% of the company is held by non-partner employees, and 18% is held by retired Goldman partners and two longtime investors,
Sumitomo Bank Ltd. and
Hawaii 's Kamehameha Activities Assn (the investing arm of
Kamehameha Schools ). This leaves approximately 12% of the company as being held by the public. Henry Paulson became Chairman and Chief Executive Officer of the firm. Hull Trading Company, one of the world’s premier market-making firms, was acquired by Goldman in 1999 for $531 million.
More recently, the firm has been busy both in Investment Banking and in Trading activities. It purchased franchise. In May 2006,
Henry Paulson left the firm to serve as
U.S. Treasury Secretary , and Lloyd Blankfein was promoted to Chairman and Chief Executive Officer.
On July 6th, 2007, several US newspapers received anonymous threat-letters targeting Goldman Sachs and its employees.
As Of 2006 , Goldman Sachs employed 26,500 people worldwide. It reported earnings of US$9.54 billion and record earnings per share of $19.69.
8 It was reported that the average total compensation per employee in 2006 was US$622,000.
9 However, this number represents the arithmetic mean of total compensation and is highly skewed upwards as several hundred of the top earners command the majority of the Bonus Pools, leaving the actual median that most employees earn well below this number.
10The current Chief Executive Officer is
Lloyd C. Blankfein . The company ranks #1 in Annual Net Income when compared with 86 peers in the Investment Services sector.
Recently Goldman Sachs has been increasingly involved in both advising and brokering deals to privatize major highways by selling them off to foreign investors. In addition to advising
Indiana on the
Toll Road deal, Goldman Sachs has worked with Texas governor Rick Perry's administration on privatization projects, and according to John Schmidt, the former adviser to the
Chicago mayor's office, it was a Goldman Sachs representative who first pitched the city on the idea of leasing out the
Skyway . Goldman Sachs has played a major role in advising states on how to structure privatization deals—even while positioning itself to invest in the toll road market.
11
Goldman Sachs is divided into three core businesses.
Investment Banking is divided into two divisions and includes (
Mergers And Acquisitions , investitures, corporate defense activities, restructurings and spin-offs) and '''Underwriting''' (public offerings and
Private Placements of
Equity , equity-related and debt instruments). Goldman Sachs is one of the leading investment banks, appearing in
League Tables . In mergers and acquisitions, it gained fame historically by advising clients on how to avoid hostile takeovers. Goldman Sachs, for a long time during the 1980s, was the only major investment bank with a strict policy against helping to initiate a
Hostile Takeover , which increased Goldman's reputation immensely. This segment accounts for around 15 percent of Goldman Sachs' revenues.
Trading and Principal Investments is the largest of the three core segments, and is the company's profit center. The segment is divided into three divisions and includes (trading in
Interest Rate and
Credit products,
Mortgage-backed Securities and loans, currencies and commodities, structured and derivative products), '''Equities''' (trading in equities, equity-related products,
Equity Derivatives ,
Structured Products and executing client trades in equities,
Options , and
Futures Contract s on world markets), and '''Principal Investments''' (merchant banking investments and funds). This segment consists of the revenues and profit gained from the Bank's trading activities, both on behalf of its clients (known as flow trading) and for its own account (known as
Proprietary Trading ).
Most trading done by Goldman is not
Speculative , but rather an attempt to profit from bid-ask spreads in the process of acting as a
Market Maker . Around 65 percent of Goldman's revenues and profits are derived from this area. Upon its IPO, Goldman predicted that this segment would not grow as fast as its Investment Banking division and would be responsible for a shrinking proportion of earnings. The opposite has been true, however, and resulted in
Lloyd Blankfein 's appointment to President and Chief Operating Officer after
John Thain 's departure to run the
NYSE and
John L. Thornton 's departure for an academic position in China.
Asset Management and
Securities Services is a rapidly growing business for Goldman as it gains market share. It is separated into two divisions, and includes , which provides large institutions and very wealthy individuals with investment advisory, financial planning services, and the management of
Mutual Fund s, as well as the so-called alternative investments (
Hedge Fund s,
Funds Of Funds , real estate funds, and
Private Equity Fund s). The '''Securities Services''' division provides
Prime Brokerage , financing services, and securities lending to mutual funds, hedge funds, pension funds, foundations, and high-net-worth individuals. This segment accounts for around 19 percent of Goldman's earnings.
As Of 2006 , the Goldman Sachs Asset Management
Hedge Fund is the largest in the
United States with $29.5 billion under management.
12
In August
2007 , it emerged that Goldman had to spend $2 billion to rescue its own Global Equity Opportunities
Hedge Fund from "significant market dislocation".
Goldman pumps in $2bn to bail out hedge fund (Times Online)
GS Capital Partners is the private equity arm of Goldman Sachs. It has invested over $17 billion in the 20 years from 1986 to 2006. One of the most prominent funds is the GS Capital Partners V fund, which comprises over $8.5 billion of
Equity .>
13 On April 23, 2007, Goldman closed GS Capital Partners VI with $20 billion in committed capital, $11 billion from qualified institutional and high net worth clients and $9 billion from the firm and its employees. GS Capital Partners VI is the current primary investment vehicle for Goldman Sachs to make large, privately negotiated equity investments.>
14
- Cogentrix Energy (Energy)
- American Casino & Entertainment Properties (Casinos)
- Coffeyville Resources LLC (Refinery)
- Myers Industries, Inc. (Plastic & Rubber)
- USI Holdings Corporation (Insurance & Finance)
- East Coast Power LLC (Energy)
- Zilkha Renewable Energy (Energy)
- Queens Moat Houses (Hotels)
- Sequoia Credit Consolidation (Finance)
- Shineway Group (Meat Processing)
- Equity Inns, Inc. (Hotels)
- KarstadtQuelle property group (Retailer)
- Nursefinders Inc. (Healthcare)
In December 2005, four years after its report on the emerging ",
Egypt ,
Indonesia ,
Iran ,
South Korea ,
Mexico ,
Nigeria ,
Pakistan , the
Philippines ,
Turkey and
Vietnam .
15
Goldman Sachs has received favorable press coverage for conducting business and implementing internal policies related to reversing global climate change.
16 According to the company web site, the Goldman Sachs Foundation has given $94 million in grants since 1999, with the goal of promoting youth education worldwide.
17 The company also has been on Fortune Magazine's 100 Best Companies to Work For list since it launched in 1998.
18
In 2005, the firm advised both the
New York Stock Exchange and
Archipelago , which owns an electronic trading platform, in merger talks. Controversy surrounded the deal as
John Thain , who heads the New York Stock Exchange, was a former Goldman Sachs Executive.
19
In 1986,
David Brown was convicted of passing inside information to
Ivan Boesky on a takeover deal.
20 Robert Freeman , who was a senior Partner, the Head of Risk Arbitrage, and a protegé of
Robert Rubin , was also convicted of insider trading, with his own account and with the firm's.
21
In 2005, Goldman Sachs received criticism from civic groups and
New York City politicians when they received approximately $1.6 billion in taxpayer subsidies (mostly through
Liberty Bonds ) from New York City and state taxpayers to finance the Firm's new headquarters near the
World Financial Center in lower Manhattan in return for a commitment of keeping at least 9000 employees and major trading operation in Manhattan. It also comes with expectation of creation of at least 4000 new jobs by 2019.
22
The FBI reported on July 6, 2007 that they are investigating letters sent to newspapers nationwide that say "Goldman Sachs. Hundreds will die. We are inside. You cannot stop us". The letters were post-marked in late June from
Queens, New York and were handwritten in red ink on loose leaf paper, signed by "A.Q.U.S.A.".
23
- ''Goldman Sachs: The Culture of Success''. Lisa Endlich . Little, Brown and Company. 1999. ISBN 0-316-64373-4
