Interesting article today on Dealbook today looking back at a "tale of two deals", the Bank of America acquisition of Merrill Lynch and Barclays acquisition of Lehman brothers. Both of these deals happened nearly exactly three years ago and it appears that the winner is pretty one sided.
Barclays paid anything but retail for Lehman, and in the process acquired a powerful franchise in the United States. Barclays is now the seventh-largest American investment bank.
And then there was the flip side...
Bank of America’s investment banking and wealth management operations, which are largely old Merrill operations, contributed $2.1 billion to Bank of America’s profits on $11.3 billion of revenue.While Merrill is currently throwing a lifeline to its parent, Bank of America, Merrill has also contributed substantially to Bank of America’s problems. The Merrill acquisition added nearly $900 billion worth of assets to Bank of America’s balance sheet. With that, Merrill’s liabilities related to the mortgage crisis were assumed by Bank of America. It is unclear how big they are, but they total in the tens of billions.
The biggest difference between the deals is that Barclays waited for Lehman to become bankrupt before they bought them, allowing them to be free of their toxic assets while BofA rushed in and took all of Merrill.
Let this be a lesson to all the monkeys out there to do their diligence before rushing into whatever the deal is. Remember, the early bird gets the worm, but the second mouse gets the cheese.
The one person both deals had in common was John Thain. I'm thinking about writing a complete post about his hand in both companies. He simultaneously scuttled Lehman's salvation and buried B of A in a matter of hours.
Also, Barclays probably would have moved faster on Lehman if the FSB (and for that matter, the US Treasury) were more cooperative.
If anyone ever asks you who's the worst trader in the history of the world, the answer is Ken Lewis.
You KNOW Lehman is filing on Monday so what do you do.................go find the next problem bank and pay a 35% premium to Friday's closing price.....Financial Cluster Fuck of Stupidity
Actually, that should be the new description for the entire financial crisis
Thain's responsibility was to his shareholders, and he successfully sold Merrill in a chaotic economy and state of financial markets, avoiding what was almost certain bankruptcy. If blame is to be cast, it should be toward Lewis/BAC Board, and maybe Paulson, if you believe the "Hank made me do it, even though I didn't want to" story. It's ironic how Wall Street complains about the Main Street populist garbage-media, yet gets distracted by a fancy crapper and some bonuses.
Yeah i guess this is partly true, but merrill IS currently profitable. yeah, they brought on toxic assets, but the real problem is the countrywide acquisition, not the merrill acquisition. at least merrill is helping to pay the bills now...
what would the potential effects of jp not buying merrill immediately have been? as in what if jp, or any other firm for the matter, waited out like barcap did for merrill to go bankrupt and then buy it up at a deep discount?
my guess is further defaults, further uncleared securities, and further fucked up shit in the short term. but in the long run maybe it would've been better to get rid of more stuff that potentially can make things worse in the future. thoughts?
Maybe I am wrong but had bofa not bought merrill, then merrill's creditors would have be the one who bear the cost of a bankruptcy, and eventually the taxpayers. This is what happened with Lehman, so I feel like Bofa did a big gift to everyone by purchasing merrill and its liabilities ?
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