Goldman Sachs (GS) acquires GreenSky and expands consumer unit

In an effort to increase its retail lending footprint, The Goldman Sachs, Inc. GS has entered into a definitive agreement to acquire GreenSky, Inc. GSKY, a preeminent fintech platform that offers consumer loan packages for home renovation.

Since its inception in 2006, GreenSky has provided simple, seamless home improvement financing solutions to approximately four million customers for over $ 30 billion in loans. With a growing network of over 10,000 merchants and proprietary cloud-native technology offering digital point-of-sale financing solutions, GreenSky’s competitive capabilities will be aligned with Goldman’s online banking platform, Marcus by Goldman Sachs.

David M. Solomon, Chairman and CEO of Goldman, said, “GreenSky and its talented team have built an impressive cloud-native platform that will allow Marcus to reach a new and active set of merchants and customers and provide them with a growing set of solutions. “

Acquisition details

As part of the deal, Goldman will acquire GreenSky in an all-equity transaction. GreenSky shareholders will receive 0.03 Goldman common shares for each share held.

Based on Goldman’s share price at the September 14 close, this implies a price of $ 12.11 per GreenSky share, which equates to the value of the transaction at around $ 2.24 billion. The transaction represents a premium of approximately 56% over the GreenSky share price at the September 14 close.

The boards of directors of both companies have approved the transaction. Subject to GreenSky shareholder approval, receipt of required regulatory approvals and satisfaction of other customary closing standards, the transaction is expected to close in Q4 2021 or Q1 2022.

Rationale for the transaction

GreenSky’s unique lending capabilities and its premier ecosystem for merchants and consumers will help Goldman strengthen its consumer banking business. Additionally, it provides Goldman with the opportunity to leverage the lender’s growing user base and tap into the $ 430 billion home improvement market and position it for significant growth.

The acquisition is expected to generate solid returns on invested capital with an increase in IRR in mid-teens. Additionally, by strengthening its consumer banking business, the transaction will diversify revenues and propel higher and more sustainable returns.

Final result

The transaction reflects Goldman’s progress in strengthening its consumer and digital offerings and in diversifying revenue sources. Moreover, since the pandemic, digital businesses and online activity have become indispensable and will continue to gain ground in the period to come.

Last month, the company struck a deal to acquire Dutch asset manager NN Investment Partners from NN Group NV in a € 1.6 billion (or € 1.9 billion) all-cash transaction. of dollars). This will enhance Goldman’s international presence, as well as European retail distribution and insurance asset management capabilities.

Over the past year, the company’s shares have jumped 106.3%, surpassing the industry’s 84.2% growth.

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Currently, he wears a Zacks Rank # 3 (Hold). You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.

Similar movements by other banks

The current low interest rate environment and other challenges due to the coronavirus pandemic have negatively impacted bank profitability. In this context, companies are looking to improve their product offerings and make opportunistic acquisitions to stay relevant.

JPMorgan Chase JPM recently signed an agreement with Volkswagen AG subsidiary Volkswagen Financial Services with the aim of entering the automotive industry and strengthening its digital payment skills. According to the agreement, the bank will take a majority stake of almost 75% in the payment platform of the automaker, Volkswagen Payments SA

In order to increase its capacities on the capital market, Citizens Financial Group, Inc. CFG has entered into a definitive merger agreement with JMP Group LLC under which it will acquire the latter in an all-cash transaction.

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