Merril Lynch

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Julien Lemaux, Danielle Morin and Dominique Hamel wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail Copyright © 2012, Richard Ivey School of Business Foundation

Version: 2012-05-30

During the night of September 14, 2008, a few hours before Lehman Brothers folded, Merrill Lynch declared defeat: it was acquired by Bank of America (BofA). Unsure of its ability to continue as a standalone entity, Merrill Lynch deliberately ended 90 years of independence.2 This nearly century-old brokerage firm sold its stock to BofA for $29 per share; the transaction totalled $50 billion. A year earlier, Merrill Lynch stock traded at slightly more than $90. “Acquiring one of the premier wealth management, capital markets and advisory companies is a great opportunity for our shareholders,” 3 BofA Chairman and Chief Executive Officer Ken Lewis said on September 15, 2008 when he announced the agreement to acquire Merrill Lynch.

Before its buyout by BofA, Merrill Lynch was the world’s largest and most widely recognized stockbroker. It dominated retail stockbroking with its army of 16,000 brokers around the world.4 At the beginning of 2008, Merrill Lynch, Goldman Sachs, Morgan Stanley, Lehman Brothers and Bear Stearns were the five largest stand-alone investment banks in the world, with a combined total history of 549 years; within six months, they would all be gone.5 The financial crisis of 2008 took its toll: Goldman Sachs and Morgan Stanley would be converted to bank holding companies while Lehman Brothers would

This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives in this case are not necessarily those of Merrill Lynch Co. or any of its employees. 2

Brian Perry, “Credit Crisis: Wall Street History,” Investopedia,, accessed May 10, 2012. 3
Excerpt from BofA press release: “Bank of America Buys Merrill Lynch Creating Unique Financial Services Firm Combines Leading Global Wealth Management, Capital Markets and Advisory Company with Largest Consumer and Corporate Bank in U.S.,”, accessed May 10, 2012. 4

Phillip Inman, “Wall Street Crisis: Bank of America Buys Merrill Lynch — Where There is Duplication, the Combination of the Two Companies Could Result in More Layoffs,”, September 15, 2008,, accessed May 10, 2012. 5

Brian Perry, “Credit Crisis: Wall Street History,” Investopedia,, accessed May 10, 2012.

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file for bankruptcy and Bear Stearns would be acquired by JP Morgan.6 Thus, these institutions, which until 2008 had been viewed as omnipotent and indestructible, proved to be giants with feet of clay. Some observers wondered whether any early signs of the financial distress that Merrill Lynch experienced in 2008 could be seen in the financial statements published in the...
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