The Goldman Sachs Sixth Sense

There’s a reason why, over my ten years at Goldman, I rarely chased private company mergers: time is our scarcest asset, and the odds of closing rarely justified the lure of potential fees.

Beyond a decade of grueling hours, always-on service, and relentless team-first mantras, you develop a few things. Deep pattern recognition, and some well-earned, fact-based biases among them.

One sticks out today: private-to-private company mergers are brutally hard.

But you wouldn’t know it from the volume of calls I used to get. “Scott! Just had an incredible dinner with [company]—we’re talking merger. We’re going to crush it!”

My answer never changed: “Amazing. Align on governance and valuation, then call me back.”

The phone never rang.

→ In Venture 4.0, consolidation is back in focus. As the strategic acquirers remain on the sidelines, the PE squads are sharpening their knives, the mega-VCs are raising dedicated rollup funds, and the speculative chatter has picked up.

→ When I say consolidations, I'm not talking about "soft landings" – those face-saving arrangements that are just a notch above bankruptcy. I'm talking about opportunistic mergers where 1+1=3.

→ These private-to-private mergers are exceptionally rare. The overwhelming majority of transactions valued over $500M involve a public company or private equity buyer; private mergers historically represent only 11% of transactions.
 
→ Why is the private company consolidation so hard? While each situation has its unique challenges, here’s my checklist of gating factors that should be addressed upfront before anyone gets too excited:

1. Leadership: Clarity. Who takes “the conn”? These questions, often a function of ego, can create insurmountable barriers. Dividing and conquering works, but only if documented early and specifically.

2. Valuation: Relative. Focus on your share of the pie, not its absolute size - it's the only thing in your control. Avoid the trap of death by a thousand adjustments. KISS and win together.

3. Stakeholders: Complex. Understand the waterfall, the various rights and triggers. Identify and vet with critical decision makers early. Get in front of the most important people and issues.

4. Assumptions: Be brutal. Model all you want, then slash your assumptions in half. Integration needs chainsaws, not scalpels. Be conservative - wrong in that direction means upside. Ensure you have the talent and stomach for the job. When these harsh realities hit, you may need to revisit of item number one…

→ Lastly, as VCs navigate Venture 4.0, we can't just apply this lens to our portfolio companies. Perhaps we turn it on ourselves. The inevitable culling of the 3,000+ venture firms demands that we confront the same hard questions we pose to founders: if, how, and when to strategically consolidate.

Can we successfully navigate our version of these critical questions? I wouldn’t count on a banker taking on that assignment! 🙂