Goldman Sachs (GS.US) announced on Monday its agreement to acquire venture capital firm Industry Ventures in a deal that will expand the Wall Street bank's business scope and provide deeper access to the American entrepreneurial landscape. According to Monday's statement, Goldman Sachs will pay up to $965 million for the acquisition - $665 million in cash and equity upon deal completion, plus an additional $300 million based on Industry Ventures' performance through 2030, also paid in cash and equity.
The San Francisco-based investment firm, established in 2000, currently manages approximately $7 billion in assets through secondary market investments, co-investments, and providing seed funding to external venture capital funds. The company has maintained a partnership with Goldman Sachs for roughly two decades, while Goldman Sachs currently manages about $3.3 trillion in assets.
Industry Ventures founder Hans Swildens and two senior colleagues will join Goldman Sachs as partners. Swildens will report to Michael Brandmeyer, a senior executive in Goldman Sachs' external investment division. In an interview, Swildens stated that through approximately 10,000 underlying portfolio companies and partnerships with over 325 firms, Industry Ventures touches about one-fifth of the US venture capital sector's business. Since its inception, his firm has delivered a 2.2x capital return rate for investors.
Marc Nachmann, head of Goldman Sachs' Asset and Wealth Management division, commented: "The consistency of his investment returns is exactly what Goldman Sachs finds compelling. Maintaining such performance over a 20-year period is no easy feat."
The two companies began discussing a potential deal several months ago. Nachmann noted that their agreement will help Goldman Sachs more effectively promote its banking and wealth management services to prospective clients. The bank's stock price has risen 37% this year, and it is scheduled to report third-quarter earnings on Tuesday.
While these additional assets are relatively small compared to Goldman Sachs' overall scale, venture capital represents a crucial growth sector in the US economy, as an increasing number of companies remain private, many benefiting from artificial intelligence and infrastructure development booms. The transaction is expected to close in the first quarter.