Goldman Sachs has found its way back into favour with Google, picking up what could prove to be a lucrative banking relationship as the internet company embarks on its next phase of expansion.
Goldman was named sole underwriter to Google’s latest sale, of 5.3m shares, a deal that is set to raise nearly $2bn for the company.
The mandate for one of Wall Street’s most powerful investment banks ends the close connection between Google and the two banks that had carried out its controversial initial public offering in August 2004.
Morgan Stanley and CSFB led the deal, which broke with tradition on Wall Street by adopting an auction format, while also producing lower fees than banks traditionally realise from such deals.
Morgan and CSFB also led a follow-on share sale for Google last year that raised nearly $4.4bn for the company.
Goldman had been among the banks initially expected to lead the Google IPO, but was dropped from the role after disagreement with the company over the structure of the transaction.
The appointment to underwrite the company’s latest stock sale comes as Google enters what is expected to be a new phase of deal-making.
Earlier this week, it concluded an agreement to invest $1bn for a 5 per cent stake in AOL, while in January it announced its biggest acquisition to date, a cash purchase of radio advertising company dMarc Broadcasting that could cost it a total of $1.25bn over the next three years, if the business hits certain financial targets.
At the same time, Google has stepped up spending on its network and technology infrastructure as well as other development spending, leading to concern among some analysts that its profit margins will start to suffer.
An expectation that competition from Microsoft, which is in the process of launching its own search advertising service, will add to the competitive pressure has weighed on Google’s shares in recent months.
Google’s shares slipped by nearly 2 per cent to $388.44 in trading in New York on Thursday after news of the share sale, which was announced late the previous day.