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Top of the heap Founded in 1869 by Marcus Goldman, a European immigrant, Goldman Sachs is one of the nation's oldest and most prestigious investment banking firms. The firm is especially renowned for its equity underwriting and M&A advisory businesses. Goldman has not only distinguished itself from its competitors among investment banks by its conservative attitude, but also by consistently avoiding the "star-culture" common to other Wall Street investment firms. By insisting that the firm come first and individual egos a distant second, Goldman Sachs has had unparalleled success among American I-banks in making high-flying corporate whiz kids submit to the overall interests of the firm. Goldman is also legendary for its secrecy. The firm rarely lets the media see what's going on behind the scenes. Even former employees tend not to speak to the press - perhaps as a result of the legal clauses that Goldman inserts in every employee's contract, which ensure that he or she will never speak out in public about even the smallest detail of office life. Global leader Goldman Sachs has strengths in many world markets. It leads competitors in the Japanese market (some competitors point to Japan-based Sumitomo Bank's part-ownership of Goldman as a reason for the firm's primacy). Goldman has recently been called upon to restructure the debts of Russia, Brazil, and Korea (which all definitely need its expertise). And, the firm counts among its chief clients German giants Siemens AG and Daimler-Benz - assisting the latter in its mega-merger with Chrysler. The IPO Contributing to the firm's mystique for years was its status as the last major Wall Street private partnership. In 1998, however, the firm's partners voted to change this identity, and offer stock to the public. Analysts believe that two major factors drove the decision. The first was that without stock leverage, Goldman could not acquire other banking businesses, and would eventually not be able to keep pace with competitors like Merrill Lynch and Morgan Stanley Dean Witter, which boast large retail brokerage capabilities (and thus can more easily sell the securities they underwrite to individual investors). The second was simply that Goldman's partners sensed that the market was at its peak, and wanted to cash in their chips. Shakeup at the top However, with world financial markets in turmoil in the late summer and fall of 1998, Goldman execs shelved the IPO. The firm's longtime head, Jon Corzine, resigned from his post as co-CEO in January 1999. The firm had absorbed an estimated $500 million to $1 billion in trading losses because of the troubled markets, and industry observers believe that Corzine, who had advocated a public offering, was pushed out of the firm's top spot by other senior execs, including Henry Paulson (who had shared the CEO position with Corzine and now is the firm's sole CEO) and co-COOs John Thornton and John Thain. Firm spokespeople asserted that relieving Corzine of CEO duties would give him the time to concentrate on IPO-related matters. Banking and trading, trading and banking In filings for its planned IPO, Goldman revealed details of its finances that had until that time been kept secret. In the five-year period beginning in 1993, the Goldman prospectus revealed, it ranked as the leading firm worldwide in the high-margin and sexy M&A and IPO businesses. In M&A, the firm has been especially impressive. In 1999, Goldman led the pack of advisors yet again, with 421 M&A deals valued at a total of more than $1.35 trillion. Goldman also ranked No. 1 on the list of lead-managers of IPOs in the U.S., with deals totaling $14.6 billion in 1999. Included in that number is Goldman's own IPO, which generated $2.9 billion in proceeds, and which was the second-largest domestic IPO in 1999. Finally, Goldman also ranked first on the list of all common stock issuance, lead-managing 123 deals valued at a combined $33.7 billion. However, while its M&A and underwriting businesses are certainly impressive, Goldman is more dependent on its trading operations (both for clients, when it takes a commission, and on its own account) - far more than its closest competitors. For example, in 1999, the firm attributed 43 percent of its revenue from trading, compared to 20 percent for Morgan Stanley. In every year from 1995 to 1999, the firm's trading revenues outpaced investment banking revenues. Trading, especially proprietary trading (when a firm trades its own capital rather than that of clients) is a volatile business, depending heavily on market conditions. Analysts have warned that Goldman's dependence on proprietary trading makes it vulnerable to market downturns. Industry observers interpret the changeover from Corzine to Paulson to be a reflection of the firm's concern over its dependence on trading. (Corzine, who is leaving the firm, rose through the ranks as a bond trader and is thought to have pushed the firm in that direction; Paulson climbed the corporate ladder as a banker.) The firm, of course, denies the existence of such internal struggles. What is undisputed is Goldman's desire to grow its asset management business. Asset management, a fee-based business, is less volatile than trading or banking. Currently, the firm lags behind Morgan Stanley and Merrill in this department. However, Goldman has been pouring personnel and money into building asset management accounts. The moment the Street was waiting for In the spring of 1999, Goldman announced that IPO plans were back on track. In response, investors rushed to secure shares. A week before the company went public, the offering was eight times oversubscribed. Goldman faced so much demand that it was able to choose its investors. On May 4, 1999, after 130 years as a private partnership, Goldman became the last major firm on the Street to go public. In the second-largest IPO in the nation's history (behind Conoco's $4 billion offering in 1998), the firm raised $3.66 billion through the sale of 69 million shares. The offering valued Goldman at a hefty $33 billion. In the aftermath of the much-anticipated IPO, industry observers are enjoying speculating about what the firm will do with its new cash. Many expect Goldman to look to buy an asset management business, such as T. Rowe Price, or an online banking business such as E*Trade or Ameritrade. The firm has indeed started to stake its claim on the Internet, first by taking a 22 percent stake in online I-bank Wit Capital, and more recently by announcing a partenership with General Atlantic Partners L.L.C. and Boston Consulting Group to create a joint venture to acquire and build online businesses for traditional companies. The new venture, to be called iFormation Group, will aim to help companies develop online strategies and help create start-ups to collaborate with large companies on e-commerce initiatives. Besides financing, iFormation Group will provide strategy, business development, financial and operational services. The companies are investing an initial $300 million in the venture, which will be based in New York. IFormation will also have offices in London and Hong Kong. Additional offices in Europe, Asia and North America will follow. A year after its IPO, Goldman Sachs presented the largest second offering by a U.S. public company when it opened an additional $40 million shares valued at $2.8 billion for sale.
Goldman's interviewing process is notorious for its grueling intensity. Candidates go through at least three rounds of interviews - and often many more. The first and second rounds usually consist of two half-hour sessions, during which the applicant interviews with two Goldman professionals, typically one associate and a vice president. The third round is the most rigorous; it consists of five or six two-on-one interviews, each of which is 45 minutes long and involves one or more of the firm's directors. There is no clear delineation of personal and professional questions during the three rounds; candidates must be prepared to answer any question at any time. And the interview process may go beyond the ordinary five to six people deal. Says one insider: "Goldman is a very, very consensus driven place. I think in the full-time hiring process, you could literally meet 25 people during that process, which is unheard of at other banks." Another contact reports going through "about 60 interviews in eight rounds." Goldman cares a lot about fit. A lot. This is the unanimous emphasis of firm insiders, who believe that more than any other Wall Street firm, Goldman weeds out those who will not fit with the firm's culture. All candidates are questioned on their willingness and ability to work hard as team players in an intense and demanding work environment. Interviewers say that they look for -- "people with smart personalities who aren't afraid to work hard. We especially don't want big egos around the place, so we try and find out how you will be able to work with someone you don't like too much personally." "They stress over and over again that anybody graduating out of a top MBA program can do what they want them to do," says one insider. "But they can't change his personality, or make him pleasant to work with. They really put a lot of effort into the personality part." In fact, one recent hire reports that he received "rapid fire personal questions -- 'Why did you go to that school?' 'How were your grades?' "How were you perceived by your peers?' 'Your professors?'" When screening potential summer associates, Goldman generally conducts two on-campus rounds and a third round at the firm's headquarters which is described as "sort of a super day, but a miniature version" with about four 30-minute interviews. Unsurprisingly, the firm does not allow split summers. For summer associates "trying out" for full-time positions, insiders say, "there's very strong attention paid to how well people work together." Play nice!
Goldman is mother and father Goldman Sachs' workplace is legendary for its "intense, goal-driven" ethic, where "success is taken for granted." While the rest of the world may exalt Goldman employees as the "Masters of the Universe," insiders themselves note that the firm "cuts their egos down to size." Goldman Sachs makes it clear from the beginning that "individual personalities are insignificant," and that "the firm comes first, second, and last." Says one recent hire: "I've seen some people who come from top schools, they came across as a bit arrogant, and they were very unwelcome [at Goldman]." New hires take some time to get used to the careful scrutiny to which they are subjected, and insiders sometimes feel that they "are under constant surveillance." At the same time, analysts and associates praise their fellow employees for being "intelligent and perceptive" yet also "prepared to make the sacrifices that have to be made for the team to succeed." Reports one associate: "Teamwork's a word that's cliched and overused, and I sort of cringe when I hear it elsewhere, but in some sense that's really what the firm prides itself on." How does teamwork play out in everyday office life? "If you need to talk to someone, they're not going to stop everything they're doing to talk to you, but they'll say come back at the end of the day. Even senior people are very accessible," reports one contact. However, working as part of a team of Goldman Sachs employees "can also be challenging because you have to hold up your end, and there's always pressure to measure up to your co-workers' high standards." Some insiders also feel that Goldman's emphasis on teamwork comes at a cost - "individuality and creativity usually are considered much less important than being a good team player." Even the most enthusiastic confess that "occasionally the stress of work can get to be too much, and you come close to cracking." Hand your life to Goldman Goldman Sachs employees work "extremely long hours," but that comes as no surprise. After all, one of the most commonly asked questions in a Goldman interview is, "How will you cope with working 90-hour weeks, or longer, for three years?" For the first few years, analysts usually work between 80 and 110 hours a week, and generally come in to the office "at least six days a week, though you're usually there every day of the week." Working until 10 at night is virtually a daily affair, and "all-nighters are pretty frequent" as project deadlines draw near. Even those employees who say that they love working for Goldman concede that the hours "just get a bit too much at times." One trader notes exasperatedly that "sometimes I don't have enough time to take lunch -- or even to go to the bathroom." New hires, however, should take heart from the fact that "the hours loosen up as you get promoted." Vice presidents rarely work all day on weekends; they reportedly usually "just drop in for a couple of hours on Saturday mornings, tell the analysts and associates what to do, and then leave." Full support Goldman's support staff wins high marks from employees for being "thoroughly efficient and professional." According to our surveys and sources, Goldman bankers enjoy better support services than anywhere else on the Street. Even analysts have secretaries to answer their calls, although they have to share secretaries -- usually one secretary is assigned to four or five analysts or associates. Goldman's support staff infrastructure ensures that back-up secretaries are always available to fill in any gaps caused by illness or absence among the regular support staff. The highly-paid support staff (like other Goldman employees, support staff receive year-end bonuses) not only perform standard administrative and clerical duties such as faxing and filing, but also help associates and analysts with making graphs, setting up databases, and creating charts and tables. Every floor at Goldman's New York headquarters has a word processing room staffed with "friendly, knowledgeable" people. Goldman's Data Resources and Library staff are also "superb," but tend to "grumble about last-minute requests." Overall, Goldman employees remark that their top-notch support staff plays an "integral" role in ensuring the smooth execution of pitchbooks and presentations. Posh offices Goldman Sachs' New York headquarters is split into two main locations; 85 Broad Street, Goldman's headquarters, houses the investment banking business and Goldman's administrative functions, while the sales and trading business is located across the street at One New York Plaza. (The firm also has a few smaller offices in New York.) Goldman's offices are "modern" and "beautiful," and the lobbies and hallways are bedecked with "expensive artwork by renowned artists such as Jasper Johns." All analysts and associates are assigned their own cubicles. Our sources complain that working in cubicles eventually "gets tiresome," because they afford very little privacy; one analyst notes that "everyone could listen in on all of your personal phone calls." Junior employees are particularly irked that "senior people can tell whether you are working or slacking off." One associate complained that "it's obvious whether you've gone home early" and said he took to leaving his suit jacket on his chair if he left the office before 9 p.m. Another former associate recalls, "You can't even read the paper at your desk without the whole floor knowing, so a lot of people took papers to the bathroom and read them in the stalls." However, as employees ascend the corporate hierarchy, the amount of privacy increases considerably. Vice presidents get their own "nice but small" offices, and partners have the luxury of large, corner offices.
Bruce Larson Advanced Degree, Investment Banking
Bear Stearns;Credit Suisse First Boston;Deutsche Bank;Donaldson, Lufkin & Jenrette;J.P. Morgan;Lehman Brothers;Merrill Lynch;Morgan Stanley Dean Witter;Salomon Smith Barney More Company Profiles For more career information, go to Vault.com ©2000, Vault.com Inc
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