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Company Profile of Goldman Sachs
Company Profile of Goldman Sachs - May 7th, 2011
The Goldman Sachs Group, Inc. is an American investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients. Goldman Sachs was founded in 1869 and is headquartered at 200 West Street in the Lower Manhattan area of New York City, with additional offices in major international financial centers. The firm provides mergers and acquisitions advice, underwriting services, asset management, and prime brokerage to its clients, which include corporations, governments and individuals. The firm also engages in proprietary trading and private equity deals, and is a primary dealer in the United States Treasury security market.
Former employees include Robert Rubin and Henry Paulson who served as United States Secretary of the Treasury under Presidents Bill Clinton and George W. Bush, respectively, as well as Mark Carney, the governor of the Bank of Canada since 2008.
The Goldman Sachs Group, Inc. (Goldman Sachs) is a bank holding and a financial holding company. Goldman Sachs is a global investment banking, securities and investment management company providing a range of financial services to a client base that includes corporations, financial institutions, governments and high-net-worth individuals. Its United States depository institution subsidiary, Goldman Sachs Bank USA (GS Bank USA), is a New York State-chartered bank. Goldman Sachs operates in three segments: Investment Banking, Institutional Client Services, Investing & Lending and Investment Management. As of December 2010, it had offices in over 30 countries. In March 2010, the Company's subsidiaries sold the La Francia mine and related infrastructure assets, including Concession 5160, and Adromi Capital Corp., the holder of the La Francia II concession, to a subsidiary of the Company. In May 2010, Nexen Inc. sold its natural gas trading operations to a unit of The Goldman Sachs Group, Inc.
Investment Banking includes financial advisory and underwriting, which consists of equity underwriting and debt underwriting. The Company’s Investment Banking segment serves corporate and Government clients worldwide. It provides financial advisory services. Financial Advisory includes strategic advisory assignments with respect to mergers and acquisitions, divestitures, corporate defense activities, risk management, restructurings and spin-offs. It provides multiple services, including acquisition financing and cross-border structuring services. Goldman Sachs also assists its clients in managing their asset and liability exposures and their capital. In addition, it may provide lending commitments and bank loan, and bridge loan facilities in connection with its advisory assignments.
Goldman Sachs’s underwriting activities include public offerings and private placements, including domestic and cross-border transactions, of a range of securities and other financial instruments. Underwriting also includes revenues from derivative transactions entered into with institutional clients in connection with its underwriting activities. The Company underwrites common and preferred stock, and convertible and exchangeable securities. It receives mandates for transactions. Goldman Sachs underwrites and originates a range of debt instruments, including investment-grade and high-yield debt, bank loans and bridge loans, and emerging and growth market debt, which may be issued by, among others, corporate, sovereign, municipal and agency issuers. In addition, it underwrites and originates structured securities, which include mortgage-related securities and other asset-backed securities.
Institutional Client Services
Institutional Client includes fixed income, currency and commodities client execution and equities. Equities include equities client execution, commissions and fees, and securities services. Institutional Client Services serves the Cmpany’s clients who come to the firm to buy and sell financial products, raise funding and manage risk. It does this as a market maker on a global basis. Institutional Client Services makes markets and facilitates client transactions in fixed income, equity, currency and commodity products. In addition, The Company makes markets in and clear client transactions on stock, options and futures exchanges worldwide. Goldman Sachs’s clients are primarily institutions that are professional market participants, including investment entities whose customers include individual investors investing for their retirement, buying insurance or putting aside surplus cash in a deposit account.
Through Goldman Sachs’s global sales force, the Company maintains relationships with its clients, receiving orders and distributing investment research, trading ideas, market information and analysis. As a market maker, it provides prices to clients globally across thousands of products in all asset classes and markets. Institutional Client Services and its other businesses are supported by its Global Investment Research division. As of December 2010, its Global Investment Research division provided fundamental research on more than 3,300 companies worldwide and over 45 national economies, as well as on industries, currencies and commodities. Institutional Client Services generates revenues in three ways: in markets, such as the United States Treasury bills or large capitalization S&P 500 stocks; in markets, such as mid-cap corporate bonds and growth market currencies, and structure and execute transactions consisting of products, such as a jet fuel hedge for an airline.
Institutional Client Services activities are organized by asset class and include both cash and derivative instruments. Cash includes trading the underlying instrument, such as a stock, bond or barrel of oil. Derivative includes instruments that derive their value from underlying asset prices, indices, reference rates and other inputs, such as an option or an interest rate swap. Fixed income, currency and commodities client execution includes interest rate products, credit products, mortgages, currencies and commodities. Interest rate products include Government bonds and money market instruments, such as commercial paper, treasury bills, repurchase agreements and other liquid securities and instruments, as well as interest rate swaps, options and other derivatives.
Credit Products include investment-grade corporate securities, high-yield securities, bank and secured loans, municipal securities, emerging market and distressed debt, and credit derivatives. Mortgages include commercial and residential mortgage-related securities and loan products, and other asset-backed and derivative instruments. Currencies include most currencies, including growth market currencies. Commodities include oil and natural gas, base, precious and other metals, electricity, coal, agricultural and other commodity products. Equities include equity client execution, commissions and fees, and securities services. Goldman Sachs makes markets in equity securities and equity-related products, including convertible securities, options, futures and over-the-counter (OTC) derivative instruments, on a global basis. It facilitates client transactions by providing liquidity to its clients with blocks of stocks or options. In addition, Goldman Sachs engages in insurance activities where it reinsures and purchases portfolios of insurance risk and acquires pension liabilities.
The Company structures and executes derivatives on indices, industry groups, financial measures and individual company stocks. It develops strategies and provide information about portfolio hedging and restructuring and asset allocation transactions for its clients. Goldman Sachs also works with its clients to create instruments to enable investors to establish or liquidate investment positions or undertake hedging strategies. It is a participant in the trading and development of equity derivative instruments. Its exchange-based, market-making activities include making markets in stocks and exchange-traded funds. In the United States, Goldman Sachs is a Designated Market Makers (DMMs) for stocks traded on the New York Stock Exchange (NYSE). For exchange traded funds (ETFs), it is a market maker on NYSE Arca. In listed options, it is registered as a primary or lead market maker or otherwise make markets on the International Securities Exchange, the Chicago Board Options Exchange, NYSE Arca, the Boston Options Exchange, the Philadelphia Stock Exchange and NYSE Amex. In futures and options on futures, the Company is a market maker on the Chicago Mercantile Exchange and the Chicago Board of Trade.
Goldman Sachs generates commissions and fees from executing and clearing institutional client transactions on stock, options and futures exchanges worldwide. It provides its clients with access to electronic low-touch equity trading platforms, and electronic trades account for its equity trading activity. Securities Services includes financing, securities lending and other prime brokerage services. The Company provides financing to its clients for their securities trading activities through margin loans that are collateralized by securities, cash or other acceptable collateral. It provides services that principally include borrowing and lending securities to cover institutional clients’ short sales and borrowing securities to cover its short sales and otherwise to make deliveries into the market. In addition, Goldman Sachs is a participant in broker-to-broker securities lending and third-party agency lending activities. It earns fees by providing clearing, custody and settlement services globally. In addition, the Company helps its hedge fund and other clients maintain the infrastructure that supports their investing activity by providing a suite of services from the moment a client begins the process of establishing a new investing business. It provides a technology platform and reporting, which enables clients to monitor their security portfolios, and manage risk exposures.
Investing & Lending
The Company’s investing and lending activities, which are longer-term, include the firm’s investing and relationship lending activities in a range of asset classes, primarily including debt securities and loans, public and private equity securities, and real estate. These activities include investing directly in publicly and privately traded securities and also through some investment funds that it manages. Goldman Sachs also provides financing to its clients. Goldman Sachs manages a diversified global portfolio of investments in equity and debt securities and other investments in privately negotiated transactions, leveraged buyouts, acquisitions and investments in funds managed by external parties. The Company has an investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC). It makes corporate, real estate and infrastructure equity-related investments.
Goldman Sachs makes corporate, real estate and infrastructure debt security-related investments. In addition, the Company provides credit to corporate clients through loan facilities and to high-net-worth individuals through secured loans. Its other investments primarily include its consolidated investment entities, which are entities the Company holds for investment purposes for capital appreciation. Goldman Sachs also invests directly in distressed assets, currencies, commodities and other assets, including power generation facilities.
Investment Management provides investment and wealth advisory services. Goldman Sachs’s clients include institutions and high-net-worth individuals, as well as retail investors, who access its products through a network of third-party distributors worldwide. It manages client assets across a range of asset classes and investment strategies, including equity, fixed income and alternative investments. Alternative investments primarily include hedge funds, private equity, real estate, currencies, commodities and asset allocation strategies. The Company’s investment offerings include those managed on a fiduciary basis by its portfolio managers, as well as strategies managed by third-party managers. Goldman Sachs offers its investments in a range of structures, including separately managed accounts, mutual funds, private partnerships and other commingled vehicles.
The Company also provides customized investment advisory solutions to address its clients’ investment needs. These solutions begin with identifying clients’ objectives and continue through portfolio construction, ongoing asset allocation and risk management, and investment realization. It draws from a range of third-party managers, as well as its offerings to implement solutions for clients. The Company supplements its investment advisory solutions for high-net-worth clients with wealth advisory services that include income and liability management, trust and estate planning, philanthropic giving and tax planning. Goldman Sachs also uses its global securities and derivatives market-making capabilities to address clients’ investment needs.
Revenues in management and other fees consist of asset-based management fees on client assets. Other fees that the Company receives include financial counseling fees generated through its wealth advisory services and fees related to the administration of real estate assets. Assets under management include only those client assets where it earns a fee for managing assets on a discretionary basis. This includes assets in the Company’s mutual funds, hedge funds, private equity funds and separately managed accounts for institutional and individual investors. Assets under management do not include the self-directed assets of its clients, including brokerage accounts, or interest-bearing deposits held through its bank depository institution subsidiaries. Goldman Sachs also receives incentive fees based on a percentage of a fund’s or a separately managed account’s return. It receives commissions and net spreads for facilitating transactional activity in high-net-worth client accounts. In addition, the Company earns net interest income primarily associated with client deposits and margin lending activity undertaken by such clients.
By 1996, the company was back on track, posting a pre-tax profit of $565 million for the first quarter. By mid-March, Goldman, Sachs had led an investor group in the successful but much-contested purchase of New York City's Rockefeller Center--dubbed the "greatest urban complex of the 20th century"--for $306 million. In further efforts to expand its roster of small-scale investors, the firm also began to aggressively acquire other firms, including Liberty Investment Management, the United Kingdom-based pension fund manager CIN Management from British Coal, and Stockton Holdings' Commodities Corp., located in New Jersey. The acquisition of such fee-based asset management firms helped to stabilize the company's unpredictable trading business both in the United States and on international markets, allowing Goldman, Sachs to retain its leadership role in the securities and banking industry.
The year 1996 was also notable for several internal changes. A new class of "junior partners" was created in September--dubbed "partnership extension" by the company--in the hopes that such promotions would stem the tide of partner defections and retirements that characterized the beginning of the decade. The firm also voted to adopt a limited liability structure, effective in November. The conversion, while significant in that it changed the company's 127-year structure as a partnership, was expected to have little impact on the way the company conducted its business. This prediction was borne out by the company's year-end pre-tax profits of $2.7 billion--the second highest in company history.
Going Public in 1999
Then, in 1998, the company began toying with the idea of going public. After ditching its initial plans in September 1998--due to faltering global markets--Goldman, Sachs launched one of the largest financial services IPOs in U.S. history. In early May 1999, the company listed on the New York Stock Exchange, raising $3.6 billion. The firm sold off approximately 69 million shares, just under 12.5 percent of the company. It then officially adopted the name The Goldman Sachs Group Inc. and named Henry Paulson, Jr., as sole chairman and CEO.
Goldman Sachs entered the new century on solid ground. After the IPO, Paulson immediately set plans in motion to secure the company's position as a major independent player in its industry. Goldman Sachs nearly tripled its employee count before making a series of job cuts in 2001. It also spent over $7 billion in acquisitions. Its most significant purchase was that of Spear, Leeds & Kellogg L.P., a leading market making firm. In 2002, this firm's NASDAQ trading and market making businesses were integrated into subsidiary Goldman, Sachs & Co., making it one of the largest market makers in the industry.
During 2000, Goldman Sachs secured net earnings of $3 billion. The following year proved to be more challenging as both earnings and revenues fell due to weakening market conditions and the economic uncertainty caused by the September 11th terrorist attacks. During 2001, the company stood as the leading advisor in merger activity and was involved in eight out of the ten largest deals completed that year. The firm advised 46 percent of Japan's merger activity and secured a position as Germany's leading merger and equity offering advisor. It also was the top underwriter of all IPOs and common stock offerings throughout the year.
The company's reliance on such activity, however, left it vulnerable to slowdowns. Indeed, in 2002 both IPO and merger activity faltered. In March, overall merger activity was down 42 percent over the previous year and just four IPOs had been launched in the United States from December 2001 to March 2002. As Goldman Sachs prepared for one of its most challenging years, its independent status came into question. The industry had seen a wave of merger and acquisition activity in past years that had created financial powerhouses that included Citibank, whose assets were triple that of Goldman Sachs, and J.P. Morgan Chase & Co., whose assets were twice as large. Rumors surfaced that unless the economy recovered, Goldman Sachs itself may be forced into a merger.
Paulson, however, maintained that Goldman Sachs would thrive on its own. He laid out the company's strategy in a 2002 Business Week article, claiming, "We want to be the premier global investment bank, securities, and investment management firm. We want to have a disproportionate share of the business of the most important clients in the most important markets." The article went on to report that in order to accomplish this, the company "must gain a lock on providing financial advice to marquee corporations, government authorities, and superrich individuals in the world's major economies--the U.S., Germany, Britain, Japan, and China." With its long-standing history of success and solid reputation behind it, Goldman Sachs may prove to do just that.
Principal Subsidiaries: Goldman, Sachs & Co.; Goldman Sachs (Asia) Finance Holdings L.L.C.; Goldman Sachs (Asia) Finance (Mauritius); Goldman Sachs (United Kingdom) L.L.C.; Goldman Sachs Group Holdings (United Kingdom); Goldman Sachs Holdings (United Kingdom); Goldman Sachs International (United Kingdom); GS Financial Services L.P.; Goldman Sachs Capital Markets, L.P.; Goldman Sachs (Japan) Ltd.; J. Aron Holdings, L.P.; J. Aron & Company; Goldman Sachs Mortgage Company; Goldman Sachs Credit Partners L.P.; Goldman Sachs Holdings (Netherlands) B.V.; Goldman Sachs Mitsui Marine Derivative Products, L.P.; Goldman Sachs (Cayman) Holding Company; Goldman, Sachs & Co. oHG (Germany); Goldman Sachs Financial Markets, L.P.; GS Hull Holding, Inc.; The Hull Group, L.L.C.; SLK LLC; Spear, Leeds & Kellogg, L.P.; SLK Holdings Inc.; First Options of Chicago, Inc.
Principal Competitors: Credit Suisse First Boston Corp.; Merrill Lynch & Co. Inc.; Morgan Stanley.
Market Cap (Mil.): $78,289.50
Shares Outstanding (Mil.): 520.51
Annual Dividend: 1.40
Yield (%): 0.93
GS.N Industry Sector
P/E (TTM): 16.51 259.45 24.59
EPS (TTM): -62.56 -- --
ROI: -- 0.44 4.72
ROE: -- 0.47 9.27
Total Assets: $312.21 billion (2001)
Stock Exchanges: New York
Ticker Symbol: GS
NAIC: 523110 Investment Banking and Securities Dealing
1869: Marcus Goldman moves to New York City and begins trading promissory notes.
1882: Goldman's son-in-law, Samuel Sachs, joins the business.
1885: The firm expands into a general partnership, Goldman Sachs & Company.
1896: The company lists on the New York Stock Exchange.
1906: Goldman Sachs co-manages its initial public offering (IPO).
1929: The Goldman Sachs Trading subsidiary falters after the stock market crashes.
1956: The firm co-manages the IPO of Ford Motor Company.
1967: The company handles the floor trade of a block of Alcan Aluminum stock--the largest block trade ever made at the time.
1981: Goldman Sachs absorbs the commodities-trading firm of J. Aron & Company.
1982: London-based First Dallas Ltd. is acquired.
1993: A federal appeals court rules that Goldman Sachs can no longer advise corporate clients in bankruptcy organization.
1999: The company goes public and adopts the name The Goldman Sachs Group Inc.; Henry Paulson, Jr., becomes sole chairman and CEO.
2002: Subsidiary Goldman, Sachs & Co. becomes one of the largest market makers in the industry.
Name Age Since Current Position
Blankfein, Lloyd 56 2006 Chairman of the Board, Chief Executive Officer
Cohn, Gary 50 2009 President, Chief Operating Officer, Director
Weinberg, John 53 2006 Vice Chairman
Evans, J. Michael 53 2011 Vice Chairman, Chairman of Goldman Sachs, Asia, Global Head - Growth Markets
Sherwood, Michael 45 2008 Vice Chairman, Co-Chief Executive Officer - International
Viniar, David 55 1999 Chief Financial Officer, Executive Vice President
Palm, Gregory 62 1999 Executive Vice President, General Counsel, Co-Head - Legal Department
Stecher, Esta 53 2000 Executive Vice President, General Counsel, Co-Head - Legal Department
Cohen, Alan 60 2004 Executive Vice President, Global Head - Compliance
Rogers, John 2011 Executive Officer
Johnson, James 67 1999 Independent Director
Bryan, John 74 1999 Independent Director
Friedman, Stephen 73 2005 Independent Director
George, William 68 2002 Independent Director
Dahlback, Claes 64 2003 Independent Director
Juliber, Lois 62 2004 Independent Director
Mittal, Lakshmi 60 2008 Independent Director
Schiro, James 65 2009 Independent Director
Scott, H. Lee 62 2010 Independent Director
85 Broad Street
New York, New York 10004
Last edited by pratikkk; May 7th, 2011 at 12:48 PM..
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