Goldman targets middle market(3)

Goldman Sachs, the US bank, has launched a direct, middle-market private equity arm under the banner of GS Direct, taking its investment in the asset class into smaller businesses, just as credit conditions make mega buyouts much harder to finance.

“It’s just become apparent to us that there are still attractive investment opportunities in what is classified as the middle market,” a Goldman spokesman told PrivateEquityOnline.com.

The programme was started in the first quarter of 2007 and is targeting companies with enterprise values ranging from $500 million (€685 million) to $2 billion, the spokesman said.

GS Direct will invest in sectors including consumer, retail, industrials, financial institutions, healthcare, media and telecom, he added.

“It is not affiliated with any of the existing funds – it’s 100 percent off of Goldman Sachs’ balance sheet,” the spokesman said.

He would not disclose information as to GS Direct investments made to date, nor the number of investment professionals working for the middle-market division.

The programme is being led by Gerry Cardinale, a managing director of the firm’s 16-year-old Principle Investment Area, which includes GS Capital Partners, the bank’s mega fund managers, and GS Mezzanine Partners, its hybrid debt vehicle.

The creation of GS Direct effectively gives Goldman a hand in every aspect of the private equity industry – from financing and advising private equity firms and LBO targets to executing its own buyouts of varying size.

In April, Goldman closed its sixth buyout fund on a record $20 billion, as well as a $3 billion secondaries fund. The firm is widely believed to be raising a mezzanine fund that may double its GS Mezzanine Partners 2006, which it values at $9 billion, including leverage.

Goldman has also launched a private electronic trading platform, GSTrUE, on which Oaktree Capital Management listed approximately 13 percent of its management company, raising more than $800 million in its initial public offering. Fellow alternative asset manager Apollo Management reportedly plans to raise $1 billion in a similar offering on GSTrUE, which is accessible only to institutions and “highly sophisticated” investors.