John Carney and Thorold Barker agree: Goldman might be a glorified hedge fund, but it sure ain’t valued like one. (If you can’t get past the FT subscription firewall, there’s a decent summary here.) Carney’s solution? Goldman should spin off its trading business. That would solve at a stroke any number of conflicts of interest, as well as do wonders to the valuation of the whole.
Barker doesn’t go quite as far as Carney, but he does reckon that more transparency from Goldman on where its profits are coming from could mean the bank’s multiples moving up towards the kind of levels seen at Fortress and Blackstone.
Let me throw in my own idea: Blackstone, or KKR, or Silver Lake, or someone along those lines, should just buy Goldman already. People have been talking about the first $100 billion private-equity deal for some time now – and this could be it. Goldman is a great PE target: an undervalued company with highly-paid managers who historically have hated the idea of a public listing, with all the disclosure requirements associated with it.
Goldman’s market capitalization right now is in the region of $85 billion. Any buyer would obviously have to pay a significant premium over that sum. But in theory, there’s no reason why it shouldn’t happen. And maybe under new management Goldman’s funds will do even better.