Financial Advisor Update

Return to Article

Rothbort: How Goldman Could Go Private

Scott Rothbort

Goldman Sachs (GS Quote) went public several years ago so that it could have greater access to the public markets and unlock value to its then longstanding partnership. That value was unlocked, some partners have cashed out, and now the company is selling for a discount to its book value. I thought that Jim Cramer made some excellent comments to that effect last night on Mad Money.

Now there is the U.S. Treasury and Warrant Buffett who stand ready to throw money at GS. Who needs the capital markets? There is simply no reason why GS in my mind would want to remain a public company at this juncture.

In order to go private, the price paid to current shareholders would have to be significantly higher. With a current market value of $30 billion, even paying $50 billion for the company would not cost that much, as there is still a good chunk of the company that remains in employee and former partners' accounts. Those individuals would likely become part of the new private company. Furthermore, with the U.S. government standing ready to inject capital into GS, there is ready financing available to make the deal happen.

Goldman should not stop there. They should buy a bank. It could be a simultaneous transaction -- buy the bank, and go private. This can all be achieved with U.S. government bailout money. I wrote more about this on my blog in commentary on Sept. 24, 2008 (which you can access from the archives), after GS did the deal with Berkshire Hathaway (BRK.A Quote). Warren Buffett may be another source for the "buy a bank and go private" strategy. An update on those bank targets:

VLY or NYB could be the best bets. GS co-president Jon Winkelried (and his wife) went to school with my wife (maiden name: Layni Horowitz), and his kids went or still go to school with my kids. We live in the same town. However, we never met. So, Jon, please don't be a stranger and give me a call. We can talk more about my ideas.