Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Quick Take: How to Spend $20 Billion?

The rich folks at Goldman Sachs (NYSE: GS  ) passed the hat and raised a cool $20 billion for the company's latest private equity fund. With potentially billions in profits at stake for the firm, its employees, and investors, what companies will this new fund buy?

Keep in mind that most buyout deals include a lot of debt. Assuming a 5-to-1 leverage ratio, Goldman has the firepower to spend $100 billion -- roughly the GDP of New Zealand, for comparison. (Not to be outdone by Goldman, it seems the Blackstone Group will raise its own $20 billion fund as well.)

Historically, the largest private equity buyout deals, including the purchases of TXU (NYSE: TXU  ) , Harrah's Entertainment (HET), and Clear Channel Communications (CCU), have never topped $50 billion. Companies like these have key elements that attract private equity firms, including strong brands, barriers to entry, healthy cash flows, and decent growth prospects.

With the emergence of megafunds like Goldman's, however, don't assume that $50 billion barrier will necessarily stand for long.

What companies should Goldman splurge billions on? Let me know on my CAPS blog.

Further Foolishness? Capital idea:

TXU is a former Motley Fool Income Investor pick.

Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 3,449 out of 27,827 in CAPS.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 526476, ~/Articles/ArticleHandler.aspx, 10/23/2016 8:36:44 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:01 PM
GS $174.67 Up +0.16 +0.09%
Goldman Sachs CAPS Rating: ***