Goldman Eyes Palmer Square Acquisition for CLO Scale
Goldman Sachs is reportedly in talks to acquire Palmer Square Capital Management, a US$37bn asset manager specializing in collateralized loan obligations (CLOs).
A deal would give Goldman instant scale in the CLO market and move it closer to alternative asset managers like Apollo. It would also accelerate Goldman's target of reaching US$300bn in credit alternative assets by 2028.
The purchase price is estimated to be around US$1bn, which would make Chris and Angie Long, Palmer Square's husband-and-wife founders, wealthy. However, some question whether Goldman is buying at the top of the market, given that valuations are peaking.
Palmer Square has issued over 100 CLOs with assets around US$27bn, generating management fees ranging from 40bp to 50bp. The firm also manages a listed business development company and conducts credit trading strategies, producing slightly higher fees on its remaining US$10bn of assets.
The question for Goldman is whether it's willing to pay a multiple of earnings for Palmer Square, which could be around 10 times Ebitda, taking the price to US$1bn. This would represent a higher percentage of assets than Morgan Stanley paid when acquiring Eaton Vance for US$7bn in 2020.
A hedge fund manager with credit structuring experience wonders about the motives of Palmer Square's owners and compares their potential sale to that of Golden West Financial, sold by another husband-and-wife team just before the global financial crisis in 2006.