What should Goldman do with its $20 billion?
The rich folks at Goldman Sachs Group (NYSE: GS) passed the hat and raised a cool $20 billion for its latest private equity fund. It could mean billions in profits for the firm, its employees and investors. What companies will it buy?
Keep in mind that most buyout deals include a lot of debt. So assuming a 5-to-1 leverage ratio, Goldman has the fire power to spend $100 billion. To put things in perspective, this is roughly the same as the GDP of New Zealand.
Yet Goldman will not be the only mega fund. It looks like the Blackstone Group will raise a $20 billion fund as well.
As for the largest buyout deals, they are still below $50 billion. Examples include TXU (NYSE: TXU), Harrah's Entertainment (HET), and Clear Channel Communications (CCU). These companies have the key elements that attract private equity firms like strong brands, barriers to entry, healthy cash flows and decent growth prospects.
Although with the emergence of the mega funds, the deal levels may break the $50 billion barrier.
So what companies do you think Goldman should splurge billions on? Let me know!