Goldman Sachs' (GS 2.51%) recent FinTech acquisition is among its top five asset management transactions. In this clip from "The M&A Show" on Motley Fool Live, recorded on April 1, Motley Fool contributors Toby Bordelon and Jason Hall discuss Goldman Sachs' acquisition of NextCapital and how it fits into its asset management business.
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Toby Bordelon: The one that was recently announced, Goldman Sachs is buying a company called NextCapital. NextCapital is a robo-advisor, but they are targeted. I'm talking about two of these, so NextCapital is targeted more. What they do is, they provide automated advice to corporate retirement plan participants. If your company has a 401(k) plan or return plan, they might use NextCapital to provide some automated advice to that plan. That's what they do. Founded in 2014, they raised, I think, $85 million last year or two years ago in 2020. That was their last financing round. The terms aren't disclosed. I don't know how much Goldman's paying for this.
Jason Hall: This is a business-to-business robo-advisor basically.
Bordelon: It is a business-to-business thing. You, as an individual, would not go use them. You would use them if your company has signed a deal with them. You'd be using their services. Yes, that's a distinction here. The Financial Times says this is among the top five asset management deals Goldman has done. I would suggest it's a little bit pricey, but they didn't disclose the terms that I could see publicly. I feel like Financial Times might know what the number is.
Hall: Somebody saw something.
Bordelon: Yes. We don't know exactly the terms, but we do know it is going to become part of the multi-asset solutions business of Goldman Sachs asset management, so it's the asset management business. That group has about $220 billion in assets management right now.
Hall: Which is very small in the grand scheme.
Bordelon: It is. It's not that big, but it's also the largest. The term they use, so it was the largest outsourced chief investment officer provider in the US. The largest, I guess, B2B provider, like the second largest in the world, largest in the US. It gives Goldman just another way to offer their corporate clients, "Hey, we can manage more of this for you. We can manage more of your retirement plans, more of your financial planning." It's good for them. They have the stand now. I'm working for a company. Now, Goldman Sachs is managing my retirement benefits. Think about this too. I'm working for maybe a start-up, Goldman Sachs is managing my financial benefits. Company goes public. I'm a millionaire. Goldman Sachs on the door, "Hey, new millionaire, do you want some of our additional asset management?" It gets in the door. It gives them access to clients from some of the other stuff. I think there are some synergies and cross-selling that can happen for this. That's what they might be doing. They're positioning themselves, I think, as a major provider of personal finance retirement benefits to corporate clients.