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Goldman Sachs’s $2.24bn Acquisition of Greensky

By Luc Roberts and Priyanshu Srivastava (Warwick), and Abilash Prabhakaran (MIT)

Photo: Vladimir Mun (Unsplash)


Overview of the deal

Acquirer: Goldman Sachs Group Inc.

Target: GreenSky Inc.

Total Transaction Size: $2.24bn

Closed date: Q4 2021 - Q1 2022 (Expected)

Target advisor: J.P.Morgan Securities LLC, FT Partners LP, Piper Sandler

The core aim of Goldman’s $2.24 billion acquisition of Greensky is to advance Marcus, the investment bank’s online-only consumer banking offering. Greensky is a financial technology company that has provided $30 billion worth of commerce financial solutions through installment loans and revolving credit products, to its four million customers. Greensky’s growing network and expansion of unique product capabilities proved to be an imperative target for Goldman Sachs, and aligns with their aim of making Marcus the leading consumer banking platform, by providing Greensky’s active client base and point-of-sale payment solutions. The acquisition is also in line with Goldman Sachs’ long term strategy: offering simple solutions to drive durable returns. The all-stock transaction will provide GreenSky shareholders with 0.03 Goldman Sachs common shares for each common share of GreenSky, and is expected to close by the fourth quarter of 2021 to first quarter of 2022.

“We have been clear in our aspiration for Marcus to become the consumer banking platform of the future, and the acquisition of GreenSky advances this goal” - David Solomon, Goldman Sachs CEO

Company Details (Acquirer - Goldman Sachs Group Inc.)

Goldman Sachs is a financial powerhouse recognized for its financial holding capabilities across investment banking, commercial banking, securities and investment management services. Today, the firm operates in over 35 countries with aims to strengthen existing business, diversify launch with new product mix and attain better operating efficiency.

Founded in 1989, headquartered in New York, United States

CEO: David Solomon

Number of employees: 40,800

Market Cap: $138.9bn (as of 20/10/2021)

EV: $930.9bn

LTM Revenue: $61.3bn

LTM EBITDA: $14.4bn

LTM EV/Revenue: 12.9x


Company Details (Target - GreenSky Inc.)

Greensky enables home improvement and healthcare firms offer financing solutions to their customers. Through the Greensky app, customers can get approved for credit and pay for services in installments.

Founded in 2006, headquartered in Atlanta, Georgia, USA

CEO: David Zalik

Number of employees: 1,160

Market Cap: $998m (as of 26/10/2021)

EV: $1.5bn

LTM Revenue: $532.520m

LTM EBITDA: $132.27m

LTM EV/Revenue: 2.82x


Projections and Assumptions

Short-term consequences

The $2.24bn acquisition is expected to provide GreenSky shareholders with 0.03 shares of Goldman Sachs common shares for each share of GreenSky, according to Goldman’s press release. This implies a purchase price of $12.11 per share, which represents an 87% premium to the 6-month average share price before the announcement at $6.46. The acquisition will add over 10,000 merchants that offer payment solutions to GreenSky's 4 million active customers to Goldman’s platform. As part of the agreement, GreenSky’s tax receivable agreement was amended so that no payments will be made following the transaction. Tax receivable agreements allow the company’s original backers to get an annual cash payment from the company for tax benefits, which here would represent a total value of $446 million, or $2.41 per GreenSky share. The transaction closing is subject to the approval of GreenSky shareholders and customary closing conditions but has been approved by the boards of both Goldman Sachs and GreenSky.

Long-term Upsides

Under David Solomon’s leadership, Goldman Sachs has expanded its focus on just investment banking and financial management for the wealthy to also provide solutions for mainstream consumers, especially through its consumer banking app Marcus. By acquiring GreenSky, Goldman Sachs will be able to more effectively provide “Buy Now, Pay Later” (BNPL) services, which has experienced a surge in demand during the pandemic. Companies like Affirm, Klarna, and Afterpay show that consumers want more flexible financing solutions. While the mentioned companies eCommerce and retail merchants provide split financing for customers and while GreenSky helps merchants in healthcare and home improvement industries, splitting up the total upfront cost into manageable payments over a while enables any consumer to more effectively manage their finances and even end up buying more from the merchant because the payments are spread out. Overall, Goldman Sachs still has a lot of work to do to improve its consumer financing platform. While it has received strong praise for Marcus and has partnered with Apple for its special credit cards, GreenSky’s acquisition brings on an experienced management team with strong consumer financing expertise and a foothold into the fast-growing and broad BNPL market, which was recently estimated to be valued at $4 billion and growing at a CAGR of 22% from 2021 to 2028.

Risks and Uncertainties

GreenSky’s focus in providing financing for customers of home improvement and healthcare firms may be too narrow for Goldman, whose goal is to provide a broader consumer banking platform. Yet, this could be seen as a strength: GreenSky’s focus allows Goldman to more effectively capture and hold onto a large yet niche market. While popular BNPL companies like Klarna and Afterpay focus on working with eCommerce merchants, GreenSky’s focus is contrary to the overall BNPL market. Thus, the BNPL submarket for home improvement and healthcare may not be as fast-growing as other areas, so Goldman Sachs might not see as much growth as they expected. Additionally, the expertise in home improvement and healthcare is not strictly transferable to other markets like eCommerce. Thus, if Goldman Sachs wants to help eCommerce merchants provide BNPL services, then GreenSky’s acquisition may not be useful in the long term. Finally, one challenge that Goldman faces is keeping up with technology improvement. As a bank, Goldman Sachs is competing with many technology companies and startups that may be more nimble and adaptable to technology. This is something that Goldman will need to keep in mind as it integrates GreenSky and plans to grow the firm. While Goldman Sachs, under David Solomon’s leadership, has been actively hiring many engineers, being able to keep up with how rapidly consumer technology can evolve is a challenge any bulge bracket bank may face.

“From GreenSky’s inception, our mission has been to deliver exceptional value helping businesses grow and delight their customers. In combination with Goldman Sachs, we’re excited to continue delivering innovative point-of-sale payment solutions for our merchant partners and their customers on an accelerated basis.” - David Zalik, GreenSky CEO


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