TWO YEARS AGO, at the Euromoney’s Awards for Excellence dinner, a senior investment banker at one of the leading global firms reflected, over his coffee, on the great talking point for the industry in 2006: the extent to which Goldman Sachs appeared to have reinvented itself as a mix between a giant hedge fund and a leading private equity investor.
LBO firms had emerged as the key drivers of M&A volume, launching ever larger and more audacious bids for public companies. Investment banks courted these clients – such a rich source of advisory fees, spreads on financing and IPO commissions – with the same ardour they once devoted to developed-world governments. Goldman was both one of these private equity giants and yet also an adviser to many of the others who were its rivals for investments. It was still managing both to advise corporate clients and, at times, to enter bids for them. This had disgruntled senior figures at one or two companies, notably BAA in the UK.
The US firm’s rivals had, in private and public, denounced an egregious conflict of interest at the heart of Goldman’s new business model.
