Goldman Sachs believed to be eyeing up Compass Education

The speculation of GSAM taking a look at Compass is a further sign investment banks are moving up the value chain to generate revenue. Picture: AFP

Goldman Sachs Asset Management is believed to be among the parties considering an acquisition of the Advent Partners-owned Compass Education.

The business has been for sale through Royal Bank of Canada and its private equity owner is understood to have had lofty price ambitions – as high as $700m, some say.

There has been talk in the market that offers have come in around $400m or $500m, mainly from private equity firms.

Compass, which Advent bought into during 2018, works with schools to simplify their technology ecosystems and has worked with over 1800 schools in Australia, Ireland and Canada.

The speculation of GSAM taking a look at the business is a further sign investment banks are moving up the value chain to generate revenue, as fees from deal and equity capital markets advising activity has fallen away in the past two years, prompting bankers to look elsewhere for money-making opportunities.

The Wall Street Journal this month reported that two vital parts of Goldman’s strategy under chief executive David Solomon are to do more lending to Wall Street clients and shift assets from the bank’s own balance sheet to funds managed for fee-paying outside investors.

It is all part of Goldman’s broader aim to transition its image from Wall Street’s swashbuckling, boom-and-bust investment bank to a more reliable, diversified institution.

But locally, in recent years, firms such as MA Financial, (previously known as Moelis Australia), led by ex UBS and JPMorgan banker Andrew Pridham, have pivoted away from pure advisory work, now generating the bulk of its income from asset management.

Barrenjoey, which was launched in 2020 by ex-UBS bankers Matthew Grounds and Guy Fowler and has over 300 staff, has been showing signs of late of similar moves, with its float of Guzman y Gomez, of which it was a shareholder.

It has purchased a stake in the Tee Tree Plaza shopping centre in Adelaide, and made efforts to buy a strategic stake in Orora.

Barrenjoey uses its strong connections with private family offices and other networks to fund help fund the transactions.

On Wednesday, The Australian also reported that Barrenjoey linked up with Scentre Group to buy half of the $350m Westfield West Lakes from Dexus and will raise funds to pay for the asset.

Under the leadership of Barrenjoey’s private capital head Michael Vardanega and with help from real private capital head Angelo Scasserra, who is the former Australian investment banking head of Credit Suisse, asset management is a growing part of the Barrenjoey business.

Meanwhile, other examples of direct investment involving Goldman Sachs are with its New Zealand business, where it has injected $300m into house building venture Vincent Capital by way of a lending facility.

Macquarie Group has embarked on investment banking advice and direct investment for some time so in some ways it could be concluded that its rivals are following suit.