Dive Brief:

• Goldman Sachs agreed to acquire the asset-management arm of the Dutch insurer NN Group for $1.87 billion, the bank said Thursday. The deal, expected to close in next year’s first quarter, is the largest for Goldman since CEO David Solomon ascended to the bank’s top role in 2018.
• The acquisition would merge NN Investment Partners (NNIP) into Goldman Sachs Asset Management (GSAM), adding about $355 billion to the $2.3 trillion GSAM counts under its supervision. About 75% of NNIP’s investments are backed by environmental, social and governance (ESG) criteria, according to Bloomberg. The deal would roughly double — to more than $600 billion — GSAM’s assets in Europe.
• The deal illustrates Goldman’s effort to lean more heavily on passive revenue streams that earn regular fees and less on volatile silos such as trading. It also highlights the importance of scale in an asset-management space that is consolidating while being squeezed by higher costs and decreasing fees.

Dive Insight:

Goldman reportedly beat out Deutsche Bank-backed DWS to win the business. Other large asset managers such as UBS, Prudential, Allianz and Janus Henderson had also shown interest.

NNIP was put up for sale after its parent company launched a strategic review of its business in April. Activist investor Elliott Management pressured NN Group to boost shareholder returns, increase its holdings of private assets, cut costs and boost capital through asset sales. The parent company said it was considering several options for NNIP, including a merger, joint venture or a partial divestment of the division. NNIP generated about 8% of the insurer’s profit during the first half of this year, according to The Wall Street Journal.

NNIP’s commitment to sustainability “mirrors our own level of ambition to put responsible investing and stewardship at the heart of our business,” Solomon said in a press release announcing the deal. “This acquisition allows us to accelerate our growth strategy and broaden our asset-management platform.”

Under the deal, NNIP’s 900 employees would join Goldman Sachs, and the Netherlands will become “a significant location” in the bank’s European business, Goldman said.

NN Group would also become a client of Goldman’s in a 10-year strategic partnership wherein the bank would provide asset management services on an investment portfolio of $190 billion.

Satish Bapat, NNIP’s CEO, would continue to lead that business but will step down from NN’s management board immediately.

In its press release, Goldman said the deal aligns “with the firm’s strategic objectives to scale its European business and extend its global reach.”

“Everything that NN does, we already do, and this is adding and accelerating our growth …  and continues to help us scale,” Solomon told the Financial Times, adding that Goldman is “focused on responding to our clients’ needs and desires around ESG.”

Goldman in late 2019 said it would commit $750 billion over the next decade in loans, underwriting, advisory services and investments toward companies and on projects focused on renewable energy, sustainable transportation, affordable education and other areas. The bank said in March that it has put $156 billion toward that target.

Solomon on Thursday told the Financial Times that Goldman would “certainly take a serious look” at further acquisitions in asset management, if they could accelerate its growth.

Asset management has seen an uptick in deals of late. French bank Société Générale in April sold its Lyxor Asset Management division for €825 billion to Amundi, which had more than twice that amount under management. Wells Fargo said in February it planned to sell its asset-management business for $2.1 billion to two private-equity firms.

“We all know that … there’s fee pressure, there is scale — it is very, very important in this business, [the] shift to passive is ongoing and also our customers demand flexibility,” NN Group CEO David Knibbe told CNBC on Thursday.