Are companies strategising their inorganic growth any better amid global turmoil? B&E presents an in-depth analyses of some top global and Indian M&As...
Boa: merrill lynch
Weekend fun!
Dine, wine and buy a company
The credit crisis sweeping across the American financial system has helped sound buyers to claim opportunity from ordeal; Bank of America (BoA) happens to be amongst the sound buyers. In a gut wrenching weekend when Lehman Brothers was headed for a possible liquidation and AIG was facing the investors’ wrath, Merrill Lynch (ML) was quick to strike a deal with BoA. In a deal valued at $50 billion ($29 a share with 70% premium over the last traded price of $17.05 a share), BoA acquired ML at about two thirds of its value a year ago and half its all time peak value of early 2007. The dramatic deal, a marriage of a commercial bank and an investment bank, which took less than 48 hours to be finalised, is one kind of a deal that has earned a dubious reputation.
Given the deal’s size, scope, complexity, and the short time in which the deal was completed; even a child could say it is humanly impossible that a thorough due-diligence could have taken place. Analysts argued that it will set a record for merger integration disaster and the fact that BoA’s shares have been massacred by 78% ever since the deal was announced on September 15, 2008, goes on to justify the same. According to Marco Boschetti, Towers Perrin’s Head of Global M&A and Restructuring, “Market turmoil has conjured up the concept of Express M&A… but increased speed brings increased risk and makes prioritisation critical.” The risks associated with the merger were not analysed and the shareholders were kept in dark that Merrill had hemorrhaged $13.8 billion during the final three months of 2008, leave alone the fact that ML had to write down $52 billion of credit related losses.
Ken Lewis, CEO, BoA, can continue to boast on the synergies and that acquiring ML was a great opportunity for BoA’s shareholders, but the reality is that investors have now filed a lawsuit against him accusing him of failing to disclose risks associated with ML takeover. And now after six moths of the deal, the only visible winners are the advisors of the deal, Fox – Pitt Kelton and J. C. Flowers & Co., who just reaped a handsome $20 million for a weekend’s work!
Boa: merrill lynch
Weekend fun!
Dine, wine and buy a company
The credit crisis sweeping across the American financial system has helped sound buyers to claim opportunity from ordeal; Bank of America (BoA) happens to be amongst the sound buyers. In a gut wrenching weekend when Lehman Brothers was headed for a possible liquidation and AIG was facing the investors’ wrath, Merrill Lynch (ML) was quick to strike a deal with BoA. In a deal valued at $50 billion ($29 a share with 70% premium over the last traded price of $17.05 a share), BoA acquired ML at about two thirds of its value a year ago and half its all time peak value of early 2007. The dramatic deal, a marriage of a commercial bank and an investment bank, which took less than 48 hours to be finalised, is one kind of a deal that has earned a dubious reputation.
Given the deal’s size, scope, complexity, and the short time in which the deal was completed; even a child could say it is humanly impossible that a thorough due-diligence could have taken place. Analysts argued that it will set a record for merger integration disaster and the fact that BoA’s shares have been massacred by 78% ever since the deal was announced on September 15, 2008, goes on to justify the same. According to Marco Boschetti, Towers Perrin’s Head of Global M&A and Restructuring, “Market turmoil has conjured up the concept of Express M&A… but increased speed brings increased risk and makes prioritisation critical.” The risks associated with the merger were not analysed and the shareholders were kept in dark that Merrill had hemorrhaged $13.8 billion during the final three months of 2008, leave alone the fact that ML had to write down $52 billion of credit related losses.
Ken Lewis, CEO, BoA, can continue to boast on the synergies and that acquiring ML was a great opportunity for BoA’s shareholders, but the reality is that investors have now filed a lawsuit against him accusing him of failing to disclose risks associated with ML takeover. And now after six moths of the deal, the only visible winners are the advisors of the deal, Fox – Pitt Kelton and J. C. Flowers & Co., who just reaped a handsome $20 million for a weekend’s work!
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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IIPM strong hold on Placement : 10000 Students Placed in last 5 year
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IIPM B-School Facebook Page
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