Goldman Sachs doesn’t break out deal-advisory revenue from the middle-market push, which instead contributes to other business lines -- which will become the figures to watch. Its bankers have set out to sign up smaller companies for foreign-exchange transactions, interest-rate hedging and commodities services. Soon, they will dial through client lists to pitch a cash-management system to be rolled out next year.
“It’s one more arrow in the quiver of the folks we are going to be sending out,” Lemkau said.
Product Push
That foray may prove lucrative if the system lives up to the bank’s internal expectations. Chief Financial Officer Stephen Scherr told analysts on a conference call last month that the cash-management tool may help the bank shave as much as $100 million from its own expenses. But the benefit to the company might multiply if customers enroll, too. Again, wooing them rests with the investment-banking division.
The firm already has hired more than three dozen bankers in the past few years for the middle-market push, and plans to dedicate about 100 bankers over time, Scherr said. Will Bousquette, a partner and 20-year company veteran, is leading the effort.
“For Goldman this is a bit more of a novelty than for JPMorgan or Bank of America,” said Ana Arsov, who covers global investment banks at Moody’s Investors Service. Goldman Sachs has long been considered “a premium player,” she said, but “it’s logical to say, ‘Is there a wallet out there that we simply have not penetrated that we could?”’
Overlooking the full potential of small- and mid-size companies came at a cost in recent decades. Banks that built relationships in that space had an edge in subsequent dealings with so-called financial sponsors, such as private equity firms, as they became more active in buying and selling the ventures in that corner of the market. Their vast pools of capital also need services that Wall Street firms offer.
To pry away market share from well established competitors, Goldman Sachs must prove to small companies it’s an ally, not an opportunist.
“We had some of the concerns,” said Colin Day, founder and CEO of software company iCIMS Inc., which he called “too small to be on their relationship radar.”
Yet Goldman Sachs ultimately worked its way into a deal, serving as iCIMS’s exclusive financial adviser in the sale of a majority stake to Vista Equity Partners last year.
“There is a little bit of skepticism out there and it’s natural,” Lemkau said. “We are serious and committed. If at any moment a client doesn’t feel satisfied, they can call the head of investment banking directly and yell at me.”