From Our Briefings Newsletter
The article below is from our BRIEFINGS newsletter of 21 August 2017:
Briefly . . . On Goldman Sachs' Regional Coverage Strategy
Across North America, certain cities are becoming hubs of corporate activity, helped by favorable economic conditions, capital creation and a quality of life that is attracting talent from around the world. Goldman Sachs’ John Waldron, co-head of the Investment Banking Division, along with senior investment bankers Dave Eisman, Dave Dase, Aasem Khalil and Jason Rowe – who lead the Seattle, Atlanta, Dallas and Toronto offices, respectively – explain the factors driving growth.
Goldman Sachs has a long history of being in key cities around the world, and the Investment Banking Division recently expanded its regional coverage strategy this year. What’s behind the regional focus?
John Waldron: It's all about our clients. We did an in-depth study of the locus of corporate headquarters and where our global capabilities are best matched to serve those needs. Cities such as Seattle, Atlanta, Dallas and Toronto are cities with strong market cap growth, economic vibrancy and employee concentration. They're also home to important investors, corporate directors and other business leaders and influencers – in no small part because they're wonderful places for people to work and raise families, and the cost of living is more reasonable than New York or San Francisco. So for us, these cities make sense for our own people. And you can envision how these regions will continue to grow and attract companies and talent from other cities.
What are some of the benefits of being local when most of these cities are just a short flight away from New York or San Francisco?
Dave Eisman: For Seattle and the Northwest region, companies want to have people who are physically here and understand what’s going on locally. Some of the world’s most successful companies are based in Seattle – Amazon, Microsoft and Starbucks, for example – and as these businesses have global capabilities, it’s been a good match for our services, advice and platform. The marriage of local and global is especially relevant given how tech-oriented the Northwest region has become. In addition, we’re starting to see significant startup and capital formation. And because of the critical mass that’s been created by some of the tech companies in Seattle, there’s a tremendous pool of talented engineers. So you’re seeing other major tech companies set up operations here to tap into that talent pool.
The other striking disconnect is that there are fewer private equity and venture capital investors in Seattle than you would expect given how significant the growth of private companies has been. That’s another opportunity where we could help – either through growth capital or by partnering with a local private equity firm. And in addition, you’re just going to spend more time getting to know the people at these companies, both formally and informally. Instead of rushing to catch a flight back home, you can meet someone for another meeting. For example, we recently advised Amazon on its Whole Foods acquisition. From our clients’ perspectives, does it help strengthen relationships knowing that their senior bankers are living in the same city? When you’re thinking about trust and a long-term commitment to your company, it probably does.
What are some of the factors that make these cities attractive destinations?
Aasem Khalil: In the South, many states – Texas in particular – have enacted business-friendly policies, making the area a popular destination for both businesses and their employees. Just looking at Dallas, where I sit, there have been about 100 companies that have moved their global headquarters here in the last few years, and the city itself has a great quality of life and is easily accessible from anywhere in the US – plus the weather’s nice. To add to Dave’s point, the people in the community have welcomed us with open arms, and we’re working hard to make a positive impact in the region. While we also have an office in Houston – which tends to be more focused on the oil and gas industries – Dallas and the wider region is diverse, with large concentrations in the industrials, consumer and technology sectors. Austin in particular is emerging as a technology hub with new companies sprouting up daily. And just by virtue of being here, the velocity of interactions with clients has increased dramatically.
Jason, you’ve recently moved to Toronto from New York to head up the Canadian business. How is client sentiment?
Jason Rowe: Canada has been under pressure in recent years because of the downturn in commodity and oil and gas prices, which affects a larger percentage of the country’s GDP. However, there’s a sense that we’ve reached the bottom of the cycle, and clients are feeling better about the markets and economy. Canadian companies are for the most part very well capitalized, especially banks and pension funds, and we are seeing a pickup in outbound M&A as these companies look for growth outside of Canada. More broadly, real estate has remained strong in the region and we are also seeing a lot of investment in technology. The Canadian government actually established a private-sector-led fund to invest in startups in order to develop a more robust local venture capital market. Lastly, consumer retail has always been a strong point for Canada with marquee brands like Canada Goose, which we took public earlier this year.
Dave, as you’re based in Atlanta, what are the factors driving growth in the Southeast region?
Dave Dase: The Southeast continues to experience significant growth and is home to a diverse set of companies across virtually all industries. The primary factors driving this are: strong economic growth policies, public/private partnerships, relatively low tax rates and living expenses, and a highly educated urban population.
While Atlanta has been at the epicenter of this growth – with job creation at 4x the national average – Charlotte, Nashville, Miami, and the Research Triangle in North Carolina are all dynamic economic centers with a strong corporate presence. There are approximately 600 public companies (over 70 S&P 500) which total nearly $4 trillion in equity market capitalization. In addition to globally recognizable brands like Coke, Home Depot and Delta, the Southeast has a strong entrepreneurial spirit, which is driving capital formation around a dynamic start-up community, particularly in fintech, healthcare IT and cyber security.
Part of the reason for this success is the partnership between colleges and the business community in developing a curriculum that graduates students into the fastest growing sectors of the economy. For instance, Georgia Tech and Emory are working together on innovative programs in bio-engineering. Finally, there is a culture of collaboration between business leaders and elected officials that’s helping to generate creative solutions and foster economic growth. Clients are excited to see the firm investing more resources in the Southeast – we’ve gotten a great response from those who see our strategy in the region as setting us apart from our competitors.