When Google was looking for Wall Street investment bankers to underwrite the Google IPO, they laid down strict terms of engagement: bring us new ideas on how to sell the deal to investors and save the usual political gamesmanship. But according to Newsweek, Goldman Sachs, the nation’s premier investment bank, unleashed its CEO, Hank Paulson, who tried to sidestep Google’s orders by reaching out to one of Google’s largest investors, Kleiner Perkins, the powerful venture- capital firm that was an early Google backer.
The move helped doom Goldman’s efforts to win the lead underwriting spot, which went instead to Credit Suisse First Boston and Morgan Stanley, reports Senior Writer Charles Gasparino in the May 10 issue of Newsweek. Paulson thought his best shot was John Doerr, one of Kleiner’s top partners. But when word of Paulson’s misstep got back to Google’s top executives, Goldman was quickly bumped from the top of the short list. “The people at Google were such fanatics about the rules,” says one executive who works at a rival Wall Street firm. “When they heard about this, they went ape s—t.” None of the parties involved — Google, Goldman Sachs or Doerr — would comment.
The two winners, CSFB and Morgan Stanley, managed to keep a low profile. John Mack, CSFB’s famously well-connected chief executive, purposely stayed out of the bidding process for fear that he might tip the scales to another player, people with knowledge of the matter say. Meanwhile, new rules for Wall Street research analysts appear to have prevented Mary Meeker, Morgan Stanley’s top Internet analyst, from playing a direct role, even though she and Doerr have done business together for years.
Goldman, meanwhile, can’t blame its loss just on Paulson. People close to the deal say bankers for the firm bragged to Google about the Goldman name, and didn’t generate enough ideas about how to sell shares to investors through an auction. “Their lack of marketing savvy may have hurt them more than Paulson,” says the executive from a rival firm.