US$13 Billion Privatization of Deutsche Telekom is Largest IPO Ever

Theme: Clients

In 1996, Goldman Sachs serves as joint global coordinator on the US$13 billion privatization of Deutsche Telekom AG, Europe’s largest telecommunications service provider. It is the largest equity offering to date.

Deutsche Telekom offering's launch on the New York Stock Exchange

In 1996, Goldman Sachs served as joint global coordinator on the privatization of Deutsche Telekom AG, Europe’s biggest telecommunications service provider. The US$13 billion IPO (DM 20 billion) was the largest initial public offering ever and the capstone of years of intense effort by Goldman Sachs to build its investment banking franchise in Germany.

To grow its presence in Europe through the 1980s and 1990s, the firm employed a country-by-country strategy of building key relationships with top decision makers. While each local market had its challenges, the barriers to entry for a non-German investment bank in Germany were particularly high. Even smaller local banks ceded larger domestic deals to the biggest German banks, a concession to deeply entrenched and seemingly impenetrable relationships.

By the 1990s, however, Goldman Sachs had established a presence in Germany, serving as the leading advisor to the Treuhandanstalt, the agency established to privatize significant sectors of the East German economy following the country’s reunification. The firm also had advised Deutsche Telekom AG on that company’s largest acquisition, the 1993 purchase of a 30 percent stake in Hungarian telecommunications company Matav, as well as a joint investment with France Télécom to form the Global One alliance with Sprint America in April 1996.

The pending Deutsche Telekom privatization deal was on Goldman Sachs’ radar for years, with the firm constantly working to prove to its German counterparts – and particularly the German government – that it was best-suited for the enormity of the task. Among the firm’s credentials was a track record of successful privatizations that included Spain’s Telefonica as well as telecom privatizations in Mexico, New Zealand, Singapore, Denmark and the Netherlands. The Deutsche Telekom deal would dwarf all of these, however, as the company was the largest European telecommunications provider and the world’s third largest.

The firm’s diligence and its history of successful telecom deals were rewarded when Goldman Sachs was selected in 1996 to serve as joint global coordinator and US book running manager on Deutsche Telekom’s privatization. On November 18, 1996, Deutsche Telekom AG began trading on the Frankfurt and New York stock exchanges. The next day, shares were also listed on the Tokyo exchange. The offering was oversubscribed more than five times, and shares traded at nearly 20 percent over issue price on their first day in Frankfurt, up 16 percent in New York. The US$13 billion (DM20 billion) IPO was the largest ever. The German government retained nearly three quarters ownership of Deutsche Telekom at the time of the IPO. This would gradually be reduced as the government began to transfer shares to the government-owned development bank, KfW.


This article was originally published as part of a series commemorating the 150th anniversary of Goldman Sachs' founding in 1869.