Goldman Sach’s Merchant Bank Loses Three Partners
Goldman Sachs Group Inc. (GS)’s merchant bank, which has raised about $120 billion in funds ranging from private equity and debt to infrastructure, said today that three of its most senior employees are leaving.
Muneer Satter, who built the world’s largest family of mezzanine funds; Hughes Lepic, who ran the merchant-banking division in Europe; and Gerald J. Cardinale, co-head of Americas private-equity funds, have decided to retire, according to three separate memos from Richard A. Friedman, who leads the merchant- banking division. They have worked at New York-based Goldman Sachs for 24, 22 and 20 years, respectively, the memos show.
The loss of the three partners -- the highest rank of employee at Goldman Sachs -- comes as the fifth-biggest U.S. bank by assets prepares for new regulations that will cap banks’ investments in such funds to 3 percent. Goldman Sachs had stakes worth $8.83 billion in private-equity funds, $3.74 billion in private-debt funds and $1.54 billion in real estate funds at the end of March, according to a quarterly filing.
“I would stay at Goldman Sachs forever if I could,” Satter, 50, said in a press release today about his decision to leave after 12 years of commuting to New York from his home in Chicago. “Starting in July, I look forward to spending each day and evening with my wife and five children.”
Goldman Sachs lost about 50 partners last year as the company cut pay awards in its worst year for profit since 2008. The company, which was a partnership before going public in 1999, continues to reward a select group of employees with the title of “partner” and a special pool of compensation. New partners are appointed every even-numbered year.
Lepic, 47, who is retiring at the end of August, joined Goldman Sachs in 1990 to work in mergers and acquisitions in New York and moved to London in 1991. He has worked in the Principal Investment Area, which manages the bank’s own investments and is known as PIA, since 1996 and has held his current role since 2009.
Lepic, a French citizen, helped establish Goldman Sachs “as one of the leading principal investors in Europe in private equity, credit and infrastructure,” according to the memo. “During his tenure PIA invested over $7 billion in private- equity transactions in Europe.”
Cardinale, 45, who is staying until the end of the year, joined the firm’s corporate finance division in New York in 1992 before working in investment banking in Hong Kong and PIA in Singapore. In 1997 he returned to New York to work as an investment banker to telecommunications, media and technology companies before returning to PIA in 1999. He has been a partner since 2004.
Cardinale, known as Gerry, was responsible for more than $6 billion in investments, including the firm’s holding in Yankees Entertainments & Sports Network, which was founded in 2001 to broadcast the games of the New York Yankees baseball team and the New Jersey Nets basketball team. Yankees third-baseman Alex Rodriguez worked with Cardinale and John Mallory in 2007 to help him negotiate a new contract, people familiar with the matter said at the time.
While Goldman Sachs doesn’t break out the merchant bank’s revenue or profit, gains on its holdings are included in a segment called “Investing & Lending” in the company’s quarterly reports. That business generated about 7 percent of Goldman Sachs’s net revenue in 2011, 19 percent in 2010 and 6 percent in 2009, according to company reports.
“Over the period from 1999 through the first quarter of 2012, the firm’s aggregate net revenues from its investments in hedge funds and private-equity funds were not material to the firm’s aggregate total net revenues over the same period,” according to a Goldman Sachs’s regulatory filing for the quarter ended in March.
At a meeting with Federal Reserve Board staff in February, Goldman Sachs executives argued that “credit funds” should be exempted from the 3 percent investment cap, according to a meeting summary published in February.
Henry Cornell, 56, who has worked in the merchant-banking division since 1992 and became a partner in 1994, was named vice chairman of the division, according to a separate memo. Tom Connolly, who has served with Satter as co-head of the corporate-credit business that oversees loan and mezzanine funds, will become sole head of that unit. Andrew Wolff will move to London from Hong Kong to lead the division in Europe, while remaining co-head of the business in Asia with Ankur Sahu.
“We are confident that these changes position us strongly for future success,” Friedman wrote in the memo. “They also demonstrate our deep leadership bench as we elevate a new set of leaders and create opportunities for other MBD professionals.”
Andrea Raphael, a spokeswoman for the bank, confirmed the memos’ contents.
Stephanie Hui, who has worked in the merchant-banking division for more than 12 years, will run the Asia business excluding Japan from Hong Kong and will report to Wolff, according to the memo. Hui was promoted to partner in 2010.
Adrian M. Jones, a partner since 2004, and Sanjeev Mehra, a partner since 1998, will run the private-equity business in the Americas, while San Francisco-based Joseph P. DiSabato, who has been a partner since 2004, will remain head of GS Growth, according to the memo. Sumit Rajpal, a partner since 2010, will lead the global financial institutions business and Kenneth A. Pontarelli, a partner since 2006, will continue to oversee the global energy and natural resources business, according to the memo.
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