Goldman firing about 12% of its investment bankers

Managing directors and vice presidents included in dismissals

May 24, 2001|By BLOOMBERG NEWS

NEW YORK - Goldman Sachs Group Inc., this year's No. 1 mergers adviser and stock underwriter, is firing about 12 percent of its investment bankers to reduce costs as business slows. The dismissals of nearly 150 employees include managing directors, vice presidents and associates, said Lucas van Praag, a Goldman spokesman.

Revenue from investment banking fell 8 percent in the first quarter from a year earlier.

Goldman's firings are a sign that the firm doesn't expect the underwriting and mergers businesses to return to the record levels of 1999 and early 2000, the height of the dot-com boom, analysts said. Rivals such as Merrill Lynch & Co., which are eliminating more than 10,000 industry jobs, may cut deeper.

Goldman shares fell $4.09 to close at $99.20. They're down 6.6 percent this year, not as much as Morgan Stanley Dean Witter & Co.'s 8.7 percent slide but more than Merrill's 1.2 percent gain. Global mergers fell 60 percent in the first quarter, and new stock sales slid 39 percent, according to Bloomberg data.

The reductions at Goldman are part of the previously announced decision to reduce the work force by about 5 percent during annual performance reviews, Van Praag said, noting that many of the 150 bankers have left Goldman already.

Goldman's work force grew by 7,200 people last year.

Earlier this year, Goldman combined its U.S. mergers and corporate-finance units in a move intended to give the firm the ability to shift people from slowing businesses.

The new unit, which comprises about 375 people, is split into four divisions, including industry groups to focus on natural resources, consumer products and industrial companies, and one for new financing tools.

Goldman, founded in 1869, has been among the biggest investment banks for advising companies, arranging their mergers and managing their stock sales.

It has taken public companies ranging from Sears, Roebuck and Co. and Ford Motor Co. to Microsoft Corp.

This year's firings "reflect current market conditions," Van Praag said.

The value of announced takeovers fell to $427 billion in the first quarter from $1.1 trillion in year-earlier period. Global stock sales slid to $60 billion from $109 billion in the first quarter of 2000.

In the past two years, the annual review resulted in the dismissal of about 2 percent of employees, he said. This year, the cuts were at a "more aggressive level," Van Praag said.

He declined to specify what regions are affected by the job reductions or to discuss the expected cost savings.

Goldman, before it went public in 1999, would encourage senior partners to leave every couple of years.

The departures made room for younger employees to advance and take the highest-paid jobs at the firm.

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