Goldman's Palmer Square talks price collateral, not fees

Goldman Sachs is in talks to acquire Palmer Square Capital Management, the US CLO manager, Creditflux reported on Sept. 22, and the report carries no price, no structure, and no account of how far the discussions have gone. The platform's size and terms are absent, so there is nothing yet against which to test a price; the only thing worth reading is the direction of travel, and it points toward a team that picks loans rather than a fee stream.

A CLO manager is a collateral business: it selects the loans that fill the pools, manages them through the cycle, and earns fees on the assets it runs. After two euro prints in September, this publication's read was that the constraint is collateral, and the house thesis pushes further: the next multi-trillion-dollar private credit market will be rated by asset pools rather than sponsor cash flows, and managers who cannot underwrite collateral end up buying other managers' exposure.

The manager layer has been moving on its own logic: our August read of the European table put less than €600m between the top two names for the month, while the year-to-date order moved on Blackstone's two-print run, and in September we flagged a €60bn pipeline in which two-thirds of the supply was M&A. Both describe a market where new collateral arrives with deal flow, which is the condition under which a bench of loan pickers is worth more than the assets it runs.

There is a second pipe, and the desk has argued it at length: insurers and defined-contribution schemes are becoming private credit's anchor pools through rated vehicles, with each CLO print a down payment on that migration. The manager that runs the pools sits next to the buyers of the paper, and assembling that position from scratch is not a hiring decision.

The deal will be priced as an asset-management transaction, but it should be argued as a talent transaction. Fees scale with assets and are valued on exactly that basis, while the team deciding which loans belong in a pool never shows up in the multiple. Fee streams can be bought at a market price from any number of sellers, but the bench that can underwrite collateral at scale, in a market where new supply arrives with M&A, is a different asset entirely. Retention is the number to watch. The coverage does not give us one.