A Look Under The Hood Of Goldman Sachs’ New Leveraged Buyout Play

Goldman Sachs Group Inc. racked up trading profits for itself every day last quarter. Clients whoA brand name CEO on the hunt for a big deal, an investment bank in need of new ways to generate fees and a private equity giant with an over-leveraged industrial company searching for new equity capital to tamp down its leverage. Welcome to Goldman Sachs’s new leveraged buyout foray.

As Goldman and Cote combed through targets across the industrial sector, private equity firm Platinum Equity Partners was stuck in its 2016 deal to carve Vertiv out of Emerson Electric for $4 billion. The PE firm had loaded Vertiv with billions in debt, some of which was used to pay a $400 million-plus dividend to itself and to roll up competitors. By mid-2019 it’s debt pile was $3.

Tuesday’s combination is a watershed for Goldman and Cote. The SPAC they created will use its $690 million to buy 20% of Vertiv from Platinum. A further $1.2 billion raised by way of public investment in private equity Goldman assembled with its clients will own 37% of the company. Platinum Equity will receive over $400 million in cash and roll 75% of its existing equity into the new company, owning 38% of it.

Cote also believes Vertiv is operating below its potential. “This company is like two-to-three years along the 15-year path that Honeywell was on,” he says. “The foundational work is done, and there is a lot of upside possible if you can get the operations right.” Areas of focus for Cote will be price increases, wrenching out better performance from Vertiv’s salesforce, and a focus on growing high-margin software and digital services through investment or acquisitions.

Really? Thought GoldmanSachs’ CEO was too busy with his side hustle as a DJ. 🙄

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