Dealbook

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As of this month, three female partners, including Alison Mass and Stephanie Cohen, will be working with so-called emerging buyers at Goldman Sachs.CreditSasha Maslov for The New York Times 

For decades, the buyers in some of the largest deals had come in three forms: private equity firms, corporations and public-market investors.

But over the last few years, a new group of buyers has sprung up: sovereign wealth funds, pension funds and even private families have flexed their deal-making muscles. As interest rates hover near zero (and in many parts of the world, below zero), these investors, with trillions of dollars in their war chests, have taken it on themselves to buy pieces of companies, or in some cases, the whole thing.

Over the last year and a half, these so-called emerging buyers bought about 17 percent of the assets sold by private equity firms, up from 2 percent in 2007, according to data compiled by Goldman Sachs. They were even more active as buyers than private equity firms themselves.

By taking a direct stake in companies, these buyers are looking for investment gains without paying management fees to private equity firms, which they would have to pay if they invested in a traditional fund. The risks are higher, however, especially because some of the newcomers do not have the same internal people who find deals and vet them that a private equity firm or a bank would have.

Some banks are stepping in to fill that void. Last month, Goldman Sachs announced plans to expand its financial sponsors group, which works with private equity firms, to focus more on these emerging buyers. The group, run by a Goldman partner, Alison J. Mass, plans to spend the next several months identifying who these buyers are and how best to cover them, she said. It was recently renamed the Financial and Strategic Investors Group.

“It was a wake-up call for us that we have to be forward-thinking and innovative,” Ms. Mass said in an interview from the company’s offices in New York. “We can’t sit and look in the rearview mirror and just cover private equity firms anymore.”

Emerging buyers are investing in every sector around the world. This month, Saudi Arabia’s main investment fund took a $3.5 billion stake in the ride-hailing start-up Uber, one of the largest single investments in a privately held start-up. In March, the JAB Holding Company, the investment arm of Germany’s Reimann family, who are heirs to the consumer goods company Joh. A. Benckiser, led an investor group that completed the acquisition of Keurig Green Mountain for about $14 billion. JAB recently agreed to acquire the doughnut maker Krispy Kreme for $1.35 billion.

Last year, the Ontario Teachers’ Pension Plan acquired PODS, a container moving and storage company, from a consortium led by the Bahrain private equity group Arcapita. And the Abu Dhabi Investment Authority, a big sovereign fund in the United Arab Emirates, was part of a group of pension funds and other buyers that paid $4 billion last year for Volkswagen’s fleet management business, Leaseplan.

Ms. Mass’s career has tracked the transformation of private equity. She started on Wall Street 35 years ago, as private equity was becoming a modern industry. She worked at the now-defunct investment bank Drexel Burnham Lambert under Leon Black, who went on to start one of the largest private equity firms, Apollo Global Management. When Drexel went into bankruptcy in 1990, Ms. Mass left for Merrill Lynch. She joined Goldman Sachs in 2001.

Her group at Goldman Sachs includes a number of prominent women, a scarcity in the worlds of both investment banking and private equity. As of this month, three female partners, including Ms. Mass, will be working with financial-sponsor clients at Goldman Sachs – out of 13 total in investment banking. Stephanie Cohen, who is the global head of financial-sponsor mergers and acquisitions, and Sarah-Marie Martin, who is joining from Credit Suisse, are the other two.

By expanding her group, Ms. Mass may be helping some of her longtime clients as well. John Connaughton, a co-managing partner of Bain Capital, a client of Goldman Sachs’ financial sponsors group, said, “We find ourselves more and more partnering with these institutions. The more they’re advised, the more they’re rational and the more they understand how deals get done.”

Some of the emerging buyers are taking steps to make their internal deal-making abilities more professional. Abu Dhabi’s sovereign fund created its own group three years ago to focus on direct investments, and it now has 15 people.

Many of the emerging buyers’ deals are made in conjunction with private equity firms, in a practice known as co-investing. The private equity firms offer some investors — whom they call limited partners — the chance to buy stakes in deals directly alongside them. Co-investing gives private equity firms access to a larger pool of capital to make bigger acquisitions, while it allows investors to pay few or no fees. Of 140 limited partners surveyed last year by PricewaterhouseCoopers, 73 percent said they had co-invested in at least one deal.

When Apollo wanted to take the ADT Corporation private this year, it needed an additional $750 million to finance the $7 billion transaction. The private equity firm called on Koch Industries – the conglomerate owned by the billionaires Charles and David Koch – to round out the investment. Koch invested, using a special type of preferred security that was somewhat less risky than regular equity. Goldman advised ADT on the transaction.

Private equity firms have come under fire for the way they choose clients to invest alongside them, tending to give more opportunities to their larger investors, critics say. And co-investors often reap the gains in these deals, while other investors in the private equity fund bear the expense of due diligence and legal fees if a deal breaks.

Not all sovereign wealth funds and other emerging buyers will be successful. Many are not equipped to execute deals and help turn around struggling businesses. “You have to be careful that you don’t lower your standards,” said Steve Feilmeier, the chief financial officer at Koch. “For the right opportunities, alternative buyers are going to really do their due diligence to make sure they’re buying a security they’re