Goldman Sachs makes the largest acquisition in nearly 20 years

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Major acquisitions have been rare in the post-crisis world, with Wall Street companies seeking to avoid the wrath of regulators and politicians.

By acquiring United Capital – a boutique company that manages 25 billion assets and more than 22,000 customers – delivers instantly Goldman Sachs (GS) a larger footprint in wealth management and access to advanced technology.
Solomon, a DJ and a part-time Goldman veteran who became CEO of the company in October, said the deal would "speed up" the wealth management strategy by "broadening our reach, allowing more customers to get out of business." access to the intellectual capital and investment capabilities of Goldman Sachs. "

Goldman Sachs aims to diversify away from trading, a troubled part of the bank in recent years.

According to Keefe, Bruyette & Woods, all major US banks posted a decline in first-quarter revenues in fixed income, commodities and currencies. Goldman's 11% drop led to the decline. Trading revenue is expected to decline further in the second quarter, due in part to a slowdown in trading activity.

"Wealth management revenue tends to be more stringent, which makes it attractive," said Brian Kleinhanzl, an analyst at KBW.

The purchase of United Capital will expand the reach of Goldman Sachs & # 39; Wealth management footprint by adding $ 25 billion in assets under management and 22,000 clients.

As part of the deal, United Capital's founder and CEO, Joe Duran, will join Goldman Sachs. United Capital employees and more than 220 US financial advisors will also join the Wall Street firm.

The deal with United Capital appears to be Goldman's most important deal since the announcement of the September 2000 purchase of market maker Spear, Leeds & Kellogg, for $ 6.5 billion. .

Kleinhanzl said that although United Capital is a "reasonably well regarded" investment advisor, the company's client base is not as rich as the typical Goldman Sachs customer. He said the regulatory filings show that the average size of United Capital's accounts is around $ 300,000, compared to about $ 50 million for Goldman's private wealth management sector.

Goldman Sachs & # 39; premiums fell by 20% - just like its profit
Beyond adding new customers, Goldman Sachs wanted to acquire United Capital to get its hands on the company's technology. United Capital's financial advisors use the FinLife CX digital platform to grow their business, customize their portfolios and stay in touch with their customers.

Goldman Sachs can leverage this technology to enhance the platforms that it uses for its private wealth management business and Ayco. Ayco's address to business executives and employees, providing financial advice and investment management tools to over 400 large companies.

Last year, Goldman Sachs sought to strengthen the technology used to help ordinary people manage their money by acquiring Clarity Money. The Personal Finance application, which uses machine learning, is part of Marcus, the consumer bank Goldman Sachs, launched in 2016.

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