Goldman buyout arm to pursue smaller deals

NEW YORK (Reuters) - Goldman Sachs (GS.N), having just raised a $20 billion buyout fund, plans to pursue smaller deals, such as capital injections and private investments in public equity, or PIPEs, its private equity chief said on Wednesday.

With the credit crunch pinching lending at investment banks, Goldman's buyout arm will focus more on rescue financings and minor stakes in companies, Rich Friedman said, speaking at the Dow Jones Private Equity Analyst conference in New York.

That strategy is a stark contrast to the large leveraged buyouts Goldman has pursued over the last several years. However, Friedman said it was too early to judge whether the era of big deals is over.

Friedman said he was not concerned about the credit crunch impinging on Goldman's merchant banking approach.

"We have a multi-strategy investment business model," he said. "I'm not worried about investment pace."

Goldman expected the new fund to last four to five years, he said, but it's looking more like it will last two to three years.

Friedman said that in the current environment, Goldman will try to execute pending deals, focus on its portfolio and make "selective investments."

The credit crunch was a shock to the private equity system, he said on the panel.

"It's like the train conductor pulled the emergency stop," he said.

Friedman added that with private equity firms hamstrung by the credit markets, more buyout groups would seek exits of their companies through the IPO market.

(Reporting by Michael Flaherty)