The Scoop
Goldman Sachs CEO David Solomon is shopping for a needle-moving acquisition after surviving a cleanup of a disastrous push into consumer banking.
He held takeover talks with $25 billion Northern Trust earlier this year and nearly clinched a $6 billion deal for private-markets specialist Cliffwater, according to people familiar with the matter. The firm has also put out M&A feelers in the world of low-fee ETFs, where it has struggled to grow.
The talks with Cliffwater, a consultant-turned-money manager with $120 billion in assets, were advanced but fizzled over price, some of the people said. Discussions with Northern Trust could heat up now that the company is in play.
The appetite for deals of this size — either would be Goldman’s largest ever — shows that Solomon, who endured withering criticism from inside and outside the firm earlier in his tenure, is feeling newly emboldened. A push into consumer banking ended in a costly retreat. He is now looking for places the firm can grow and has a valuable currency to spend: Goldman’s stock is at all-time highs, up nearly 50% from a year ago.
Step Back
When Solomon took over the firm in 2018, Wall Street expected deals to follow. Analysts and amateur Goldmanologists made much of the torch passing from Lloyd Blankfein and Gary Cohn, traders steeped in the world of momentary edge-seeking, to Solomon and his lieutenant, John Waldron, investment bankers who grew up advising companies on big strategic pivots. Instead the pair got bogged down unwinding Goldman’s Main Street lark, which put big takeovers out of financial reach and dinged the firm’s standing with regulators in Washington. An internal mutiny also limited Solomon’s flexibility for big moves.
Both are now resolved, leaving Goldman with a simpler business and the leeway with investors and employees to think about takeovers. The Trump administration appears open to deals, too, especially after big banks were found last month to be holding more capital than they need.
Any deals are likely to be in Goldman’s asset management arm, which oversees $3.3 trillion but doesn’t carry the same cachet as firms such as Blackstone or KKR. It is still small in real estate investing and ETFs, a strategy it launched a decade ago, and is looking for inroads to retail investors who are clamoring for access to private loans, startup stakes, and other non-traded assets.
Solomon has long seen acquisitions as a way to close the gap: He pursued a takeover of Dimensional Fund Advisors, the $800 billion manager of mutual funds and ETFs, around 2022 but talks petered out, people familiar with the matter said at the time.
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Northern Trust would bring Goldman $1.3 trillion in client money, boosting its total by 40%, and a mundane but giant asset-servicing business that serves as a ledger for much of Wall Street. Cliffwater has a gold mine in its flagship loan fund, which mimics a publicly traded mutual fund but invests in edgier private credit deals. (Talks with Goldman broke off earlier this year, the people said, and Cliffwater later sold a stake to TPG and Singapore’s Temasek, making any deal now unlikely.)
Goldman declined to comment. Asked last week during a quarterly call with analysts about acquisitions, Solomon sounded wary but open. “The bar is high,” he said.
Spokesmen for Northern Trust and Cliffwater declined to comment. A representative for Dimensional didn’t respond to a request for comment.
Liz’s view
Goldman has hit a growth wall. It has two businesses — asset management and a Wall Street trading and dealmaking arm — that, if left alone, will grow with the global economy but no faster. That leaves acquisitions, and with a sky-high stock price and seemingly friendlier regulators in Washington, it’s a logical time to go hunting. Transformative M&A can also cement CEOs’ legacies, something likely on the mind of Solomon, who is seven years into the job and has Waldron waiting in the wings.
Solomon’s challenge as he contemplates takeovers is that Goldman has a lousy track record. Despite a peerless reputation advising others on deals, the firm has done few itself, none particularly memorable or transformative. Its biggest swing, the $6.5 billion acquisition of NYSE floor specialist Spear, Leeds & Kellogg in 2000, was a dud. Its acquisitions in consumer banking were at worst blunders and at best decent deals struck in pursuit of a doomed strategy. Wealth manager Ayco, bought in 2003, was profitable but not game-changing.
Its one clear winner was its 1981 purchase of J. Aron, which brought a leading commodities-trading business and a cadre of future leaders including Blankfein and Gary Cohn. But even that was a culture clash — J. Aron’s traders were famously forced to use a separate elevator bank — that took years to pay off.
The kind of needle-moving deal Solomon needs now is made harder by Goldman’s insularity and its tendency to spit out outsiders like rejected organs. Solomon told analysts last week that “these are ‘people businesses,’” nodding to the cultural schisms that can trip up takeovers whose value depends on humans rather than, say, factories.
Solomon, a dealmaker by training, is itchy as the clock ticks down on his run. JPMorgan bought First Republic in 2023, Wells Fargo is finally out of the penalty box and able to grow, and Morgan Stanley — whose rivalry with Goldman is ancient and reflexive — has cemented itself as the best acquirer on Wall Street with a string of takeovers from Smith Barney to E*Trade. Envy is a powerful motivator, especially on Wall Street.
The holy grail for Goldman would be Fidelity, if Abigail Johnson, whose family controls the retirement and wealth-management giant, were keen to sell. In the meantime, it will buy where it can and guard against indigestion.
Notable
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William Cohan liked a Goldman-Bank of New York combination back in 2023. (BNY is also competing to buy Northern Trust.)
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Goldman Sachs’ merger bankers brokered $1 trillion of deals last year, but it’s been a quarter-century since the firm itself bought anything of size.
The View From David Solomon
“There’s got to be a strategic fit in terms of things that we’re prioritizing in the growth of our asset and wealth management franchise,” Solomon told analyst last week. “Secondarily, these are people businesses. You have to have enormous confidence in the people, knowledge and the people, the cultural issues, et cetera. And then, of course, there’s financial analysis around that, which really gets to ‘what do you pay for it?’ .... To get all that stuff to align on a property that’s available— that’s a high-quality property — is a very hard thing to do.”
