Banking & Finance

Goldman Sachs Adds $25 Billion in Assets for $750 Million

Paul Ausick

One of the country’s biggest banks, Goldman Sachs Group Inc. (NYSE: GS), announced Thursday morning that it has agreed to acquire privately held wealth management firm United Capital Financial Partners Inc. for $750 million in cash. United Capital has more than 22,000 clients across the United States, served by 220 financial advisors, and $25 billion in assets under management.

The deal, reported last Friday by The Wall Street Journal to be close, is expected to be completed in the third quarter of this year, pending regulatory approvals, and would lift Goldman’s total assets under management by about 5% from its current level of roughly $500 billion. Goldman’s existing wealth management business focuses on high net worth individuals, families and endowments. The bank’s Ayco group offers investment management services to corporate executives and employees of more than 400 companies, including 60 of the Fortune 100.

David M. Solomon, board chair and chief executive of Goldman Sachs, commented:

We have a leading wealth management franchise, driven by our preeminent Private Wealth Management and Ayco offerings, which will serve as a cornerstone of our business as we execute on our long-term strategy to offer clients solutions across the wealth spectrum. United Capital will help accelerate this strategy by broadening our reach, allowing more clients to access the intellectual capital and investment capabilities of Goldman Sachs.

In other words, Goldman will now be fishing in a bigger pond. How much bigger (or smaller) the fish are depends on how successful Goldman can be at luring United Capital’s mass-affluent clients into buying other Goldman investment products.

The deal is viewed as a “huge validation” for the registered investment advisor industry, Fiduciary Network CEO Karl Heckenberg told Financial Planning. Industry analyst Chip Roame of Tiburon Strategic Partners seconded that opinion:

This is a big deal. Private equity firms have paid more for advisory firms and Focus [Financial Partners Inc. (NASDAQ: FOCS)] went public for more money. But this deal is important because United, which at its core is an aggregator, is being acquired by a prominent strategic buyer, not a private equity buyer.

Goldman shares traded up about 1.2% at $198.74 early Thursday morning. The stock’s 52-week range is $151.70 to $245.08, and the 12-month consensus price target is $229.32.