Goldman Sachs keeps a tight leash on its analysts and bankers, carefully controlling their public appearances and what they say to reporters. Participants at the Thunderbird Global Private Equity Investing Conference in Glendale, Ariz., got the chance to pick the brain of one of Managing Director Michael Koester. Koester’s keynote speech offered insight into the investment bank’s thoughts on several industry trends.
“Private equity in Asia is a tremendous opportunity and will continue to grow, it’s still under-penetrated. If you think you can take someone from lower Manhattan and pop them in Shanghai, you’re in for a surprise. We’ve been in Asia and bid the highest price and haven’t won. Sometimes we bid lower and win. It’s all about relationships.
“We think we are one of the leaders in Asia, which is an emerging area that has had a lot of focus. Whether it’s an American investment, a European investment or elsewhere, the effects of Asia are felt.”
“I don’t think it’s that surprising that a big private equity firm is going public. You saw this with investment banks. It’s happened in industry after industry. One of the things private equity firms have to deal with is transition from generation after generation. Going public is one way to mitigate that. I think it can be successfully managed. It’s been reported that Blackstone studied Goldman Sach’s own IPO when considering theirs. Steve Schwartzman is a genius. If anyone can get it right, it’s probably them. We’ll probably see other people go after them.”
Operational improvements critical
Koester said that buyout shops should now expect to get the majority of their gains from improving a target company’s operations instead of just applying financial leverage. “Maybe 10 years ago there were one or two firms that happened to have operations managers on staff. Now everybody does. We have eight people on staff that have been CEOs for decades. We’re borrowing things that venture capitalists have been doing for years. Where will most of our return come from? We think it’ll be coming from operational improvements.” —A.H.