Goldman in talks to buy $37 billion credit firm Palmer Square

(Bloomberg) -- Goldman Sachs Group Inc. has emerged as the lead bidder to acquire a credit manager that oversees $37 billion as the bank revs up its dealmaking pace.

The Wall Street heavyweight is in talks to buy Palmer Square Capital Management, the husband-and-wife-run firm that has grown to become one of the biggest issuers of collateralized loan obligations, according to people with knowledge of the matter. The Kansas-based firm, led by Chris and Angie Long, has expanded on the back of explosive growth in the global market for corporate loans bundled into bonds.

While the two sides have been trying to hammer out an agreement, no final decision has been made and talks could still fall through, said the people, asking not to be identified as the information isn't public. A spokesperson for Goldman declined to comment and a representative for Palmer Square didn't respond to requests for comment.

Goldman, long seen as a major adviser on corporate takeovers, has had a more spotty record as an acquirer of businesses. But in the last year, the firm has sought to fix that with a spree of deals aimed at bulking up its $4 trillion asset manager.

"We have gaps. We've been looking very, very carefully for places where there are things that can fill the gaps," Goldman Chief Executive Officer David Solomon said last week at an industry conference, explaining the rationale for the recent spurt of deals. "Are we going to do some more? Probably. There's some other obvious gaps we have where if we can find the right things, we'd do them."

Just in the last year, Goldman has struck deals for two specialized ETF providers, a commercial real estate investor and a venture capital investor. While it has long counted itself as one of the biggest alternative asset-management firms, Goldman doesn't churn out the same volume of CLOs as other giants in the space.

A deal to acquire Palmer Square could quickly scale Goldman's presence in that business. The firm's biggest attraction is a CLO platform that accounts for about $27 billion of total assets under management, according to S&P Global Ratings.

The US CLO market has quadrupled to more than $1.3 trillion in the past 15 years. Investors in large-scale asset managers like the "sticky" recurring fees that the vehicles generate.

Palmer Square's other investments span opportunistic credit, private credit and a publicly traded business-development company.

Princeton Hub

Chris Long founded Palmer Square to seize on credit-market dislocations in the wake of the 2008 financial crisis. Angie Long joined a few years before it began managing CLOs in 2013. She's now chief investment officer, and Chris is chairman and CEO.

Based in Mission Woods, Kansas, the company was founded by the couple, who met at Princeton University and landed jobs together at JPMorgan Chase & Co. Palmer Square is named for the hub in the heart of Princeton, New Jersey, across from the Ivy League school.

Angie Long was part of a JPMorgan team that built up the then-nascent market for credit derivatives. She was 29 when she reached the rank of managing director at the New York-based bank.

"One of the things that happens with these kinds of acquisitions is they're talent acquisitions for Goldman Sachs," Solomon said last week, speaking generally about the firm's thinking behind the deals it has pursued. "We're not going to do it if we don't really like the talent and the talent doesn't really want to be a part of Goldman Sachs."

--With assistance from Todd Gillespie.

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