(Adds other news from annual meeting)
By Joseph A. Giannone and Michael Flaherty
NEW YORK, March 27 (Reuters) - Goldman Sachs Group Inc. (GS.N) seeks to raise the largest corporate buyout fund ever, even as the Wall Street bank deflects reports that its growing clout as an investor has private equity firms on edge.
Goldman Chief Executive Lloyd Blankfein on Tuesday said the firm expects to bring in around $19 billion to $20 billion for its next buyout fund, a target that exceeds the amount raised so far by its biggest private-equity clients.
“It might be a little more, it might be a little less,” Blankfein told shareholders at the company’s annual meeting in New York City.
Goldman’s ambitious fund-raising target comes at a time when some of the biggest buyout shops grumble, privately, about the Wall Street bank’s growing clout as an investor and its heavy-handed role in some recent deals.
Rival bankers claim Goldman lost its chance for a coveted spot on Blackstone Group’s IPO in part because it is viewed as too much of a competitor.
But in an interview before the annual meeting, Blankfein told Reuters: “We have very good relationships with our financial sponsor clients.”
Blankfein also observed during the meeting that Goldman advised Blackstone in its record-setting $32 billion purchase of Equity Office Properties and provided financing, proof the bank remains on good terms.
Goldman, Blankfein told Reuters, is not about to change its approach to the business just because it was excluded from the Blackstone IPO.
“Based on the public statements from some of our competitors, they look at our business model and they try to emulate it,” Blankfein said. “We are not abandoning our approach.”
Goldman does miss out on, or takes a pass on some deals due to “business selection,” or due to conflicts with other transactions, he said.
“We happen to have, as a firm, a terrific relationship with Blackstone and we are not going to be, as much as we’d like to be — it would be impossible for us to be — in every piece of business,” Blankfein told shareholders.
Goldman’s buyout fund would allow it to buy companies worth tens of billions of dollars. It also increases the chances that Goldman will compete with Blackstone and other prized private equity clients for large takeover targets.
The fund would leapfrog the $18.1 billion Blackstone has raised so far for its next fund, according to the prospectus for Blackstone’s pending initial public offering.
Private equity firms dole out billions of dollars in fees to Wall Street every year, and most investment banks abandoned their private equity business or shrunk it rather than risk driving these lucrative clients away.
While Wall Street backed off the business, Goldman expanded it, buying companies alongside other private equity bidders.
Goldman reaped enormous gains from its investments, while maintaining its position as the world’s top merger adviser, encouraging rivals to jump back in.
Morgan Stanley (MS.N) is targeting a buyout fund of around $6 billion for deals in the United States and Europe, according to sources. Merrill Lynch MER.N and Lehman Brothers LEH.N also have increased their investing activity.
Blankfein’s comments on Tuesday echo his comments to investors in November, when he said Goldman’s strategy is not just to advise on deals, but also to provide financing and invest capital.
“I don’t think those elements merely co-exist: I think they are necessary,” Blankfein said. “If you’re going to be a strong adviser in today’s world, you have to be a very strong financier and a capable investor. That is what’s called for.”
Goldman buyout deals include the $14.6 billion management buyout of energy pipeline giant Kinder Morgan and the purchase of fast food chain Burger King.
In other meeting news, shareholders rejected proposals seeking full disclosure about the firm’s charitable donations and its policies regarding economic and environmental sustainability.
Both proposals, critical of Goldman’s 2002 donation of 680,000 acres in Chile’s Tierra del Fuego to the Wildlife Conservation Society, received less than 7 percent of votes cast.
The bank also extended voting until April 11 for a third proposal, submitted by corporate gadfly Evelyn Davis, calling for a ban on stock options. The proposal had mistakenly been left out of the bank’s original proxy statement, prompting Goldman to issue an amended proxy and mailing new forms to investors.
Blankfein apologized to Davis during the meeting.