In 2021, Goldman Sachs broke headlines with its 2.2 billion purchase of GreenSky, a fintech lender specializing in facilitating consumer home improvement loans. Now in 2023, Goldman Sachs faces a big writedown on the GreenSky deal, according to CNBC.
REUTERS/Andrew Kelly
Reports suggest that bids for GreenSky’s loan origination platform have fallen short of expectations. One bidder said GreenSky was worth around $300 million, while another said $500 million, according to the report, though both prices came well below Goldman’s hopes.
One Goldman Spokesperson told Reuters, “We’re pleased with the participation by bidders, we’re in the middle of the process and we’ll learn more as we go forward”. However, no details were revealed about the possible writedown.
The bank’s President and Chief Operating Officer, John Waldron, disclosed in a conference held in June that there might be a significant writedown of $500 million on the goodwill associated with the GreenSky acquisition. Goodwill represents the premium a company, such as Goldman Sachs, pays when acquiring another business. It accounts for intangible assets like reputation, customer relationships, and brand values that are difficult to quantify. In the case of the GreenSky acquisition, Goldman Sachs paid a substantial premium above the book values of the assets.
REUTERS/Mike Blake
As the sale process continues, Goldman Sachs faces the potential need to write down the goodwill associated with the GreenSky acquisition, meaning that the actual value and performance of the business may not have justified its initial premium. A writedown of this magnitude could have significant financial implications for the bank and its stakeholders. According to Reuters, shares of Goldman were down 1.4% in mid-morning trading on June 23rd.
Goldman’s potential writedown highlights the complexities and nuances in mergers and acquisitions and how difficult it is to speculate on the long-term value of businesses.
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