Goldman in Global Expansion Mode - Analyst Blog

On Tuesday, Globes, a business daily of Israel, reported that The Goldman Sachs Group Inc. ( GS ) has purchased a 10% stake in Israel-based Viola Group for $20 million. With about $2 billion in investments under management, Viola Group is a leader in innovative private equity investment. The company is focused on technology-based growth opportunities in Israel.

According to the source, Goldman will not be the part of management team of Viola Group following the stake buyout; it will be just a financial stakeholder. Moreover, the proceeds of the transaction will be distributed among partners of the company.

Globes also reported, in the last few years, Goldman has invested about $250 million in Israeli companies. Moreover, the investment boutique covers acquisition of stakes in mostly high-tech companies in Israel. In addition, the business daily affirmed that Goldman's Investments include Powermat Technologies Ltd., Mobileye Inc., and Cyber-Ark Ltd. However, all of these are undisclosed by Goldman till date.

Like other big Wall Street banks such as Bank of America Corporation ( BAC ) and JPMorgan Chase & Company ( JPM ), Goldman has been buckled under the weakness in the wider economy and the fundamental pressures on the banking sector. Last month, the bank reported a 67% fall in its 2011 earnings compared to the prior year, and has targeted approximately $1.4 billion in run-rate compensation and non-compensation expense reductions by trimming the number of staff and planned expenditures.

Through acquisitions and expansions globally, Goldman is trying to grab every opportunity to leverage its strong reputation in the corporate trust market. The expansion mode of the company has been mounting since the beginning of 2012.

Last week, GS Capital Partners, a private equity unit of Goldman, along with Advent International, a private equity firm, agreed to purchase credit-reporting firm TransUnion Corp in a $3 billion deal. However, the terms of this deal were undisclosed. The deal is expected to be completed by the first half of the second quarter of 2012.

Following the completion of the takeover, Advent and Goldman look forward to provide their clients with continual services and superior information, and risk management products in the US as well as in other key growth markets.

Further, in the first half of February, Goldman agreed to purchase 4.8% stake in Mongolia's Trade and Development Bank. Goldman is one of those foreign banks who have shown interest in the Mongolian economy. Goldman's global expertise, experience and financial strength will help the Mongolian bank to develop further. Goldman's stake buyout in the Mongolian bank indicates its plan to gain exposure in the Mongolian economy, whose growth is stimulated by the developing resources of the country.

Moreover, Goldman Sachs Asset Management (GSAM), a wing of Goldman also announced its plan to purchase Vermont-based Dwight Asset Management Company from Old Mutual Asset Management (OMAM). The deal is expected to close in the second quarter of 2012.

The completion of the acquisition would help Goldman gain significant market share in the defined contribution investment-only business. Moreover, the bank would be able to prosper its defined contribution business and provide more investment plans to facilitate retired people in capitalizing their hard earned retirement savings.

The acquisition spree of Goldman indicates the company is moving ahead on the path of improving its financial position. The completion of such deals will enable the bank to enjoy a better position in the ongoing uncertain global economic scenario compared to its peers.

Goldman currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain a long-term Neutral recommendation on the stock.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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