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Goldman's (GS) Buyout of NN Investment to Boost Europe Presence

In a bid to bolster its European distribution and fund management capabilities, Goldman Sachs Group, Inc. GS has entered an agreement to acquire NN Investment Partners from NN Group N.V. in a €1.6-billion (or $1.9 billion) all-cash transaction.

NN Investment is a preeminent European asset manager based in The Hague, Netherlands, and has $355 billion in assets under supervision and around $70 billion in assets under advice. The company is a top-ranked environmental, social and governance (ESG) manager in Europe, with 75% of its assets under supervision being ESG integrated.

Conditional on regulatory and other approvals, the transaction is anticipated to close by the end of first-quarter 2022.

The companies will also enter a long-term partnership agreement to manage a portfolio of around $190 billion of assets, making Goldman Sachs the largest non-affiliated insurance asset manager globally, with more than $550 billion in assets under supervision.

Deal Rationale and Benefits

Leveraging on NN Investment’s expertise, Goldman Sachs will strengthen its fund management and distribution platform across retail and institutional channels, making the Netherlands a hub of its augmented European footprint.

NN Investment’s business will complement Goldman Sachs’ existing asset management business in Europe by introducing new capabilities and advancing growth in products such as European equity and investment-grade credit, sustainable and impact equity, and green bonds.

As of the second-quarter end, Goldman Sachs had $2.3 trillion in assets under supervision firmwide, and buyout will boost it to more than $2.6 trillion. This is also in line with the company’s aim to expand its Europe business. It will increase assets under supervision in Europe to more than $600 billion.

David Solomon, chairman and chief executive officer of Goldman Sachs, noted, “this acquisition allows us to accelerate our growth strategy and broaden our asset management platform. NN Investment Partners offers a leading European client franchise and an extension of our strength in insurance asset management.”

Our Take

ESG investing has been gaining traction, as indicated by the huge inflow of investments across the globe in ESG-focused investments. This can likely be tied to the coronavirus pandemic shifting investors’ interest toward those companies that perform well on ESG targets.

The acquisition of NN Investment will facilitate Goldman Sachs to associate with a high-rated European ESG brand, and will add attractive ESG product suites and capabilities, making the deal a strategic fit. Aside from this, the move will significantly scale Goldman Sachs Insurance’s asset management business and reduce reliance on revenues from trading and deal advising activities.

Over the past year, shares of the company have jumped 97.6%, outperforming 85.5% growth recorded by the industry.

 


Image Source: Zacks Investment Research

 

Currently, it carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Similar Moves by Other Banks

The current low interest rate environment and other challenges due to the coronavirus pandemic have been taking a toll on banks' profitability. Amid this, companies have been moving toward opportunistic acquisitions to counter increased investment in technology and enhance product offerings.

Earlier this month,Fifth Third Bancorp FITB completed the previously-announced buyout of Provide, a digital platform for healthcare practices. The deal underlines the bank’s continued digital innovation efforts and focus on the healthcare sector. It adds world-class national digital capabilities and will enable the company to address complex lending and banking needs of retail healthcare providers.

Truist Financial TFC inked a deal to acquire Service Finance Company, LLC from Canada-based ECN Capital Corp. for $2 billion in cashto further augment its point-of-sale (POS) lending business. Service Finance is one of the leading providers of POS financing solutions for the home improvement industry.

In July, as part of efforts to strengthen its asset management arm, U.S. Bancorp’s USB primary subsidiary U.S. Bank inked a deal to acquire PFM Asset Management LLC. The deal is expected to close in fourth-quarter 2021, subject to regulatory approvals and customary closing conditions.


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