Bank of America completes $24b Merrill acquisition

Thomas Coyle

2 January 2009

Shotgun combination results in private-client, asset-management leviathan. With the on-schedule completion yesterday of its acquisition of brokerage powerhouse Merrill Lynch, Charlotte, N.C.-based Bank of America now owns the biggest wealth-management business in the world.

"We created this new organization because we believe that wealth management and corporate and investment banking represent significant growth opportunities, especially when combined with our leading capabilities in consumer and commercial banking," says Bank of America's chairman and CEO Ken Lewis. "We are now uniquely positioned to win market share and expand our leadership position in markets around the world."

Timing

Bank of America muscles into 2009 with around 20,000 financial advisors and more than $2 trillion in wealth-management client assets in a business that goes from call-center mutual-fund and annuity sales at the low end of the "wealth" spectrum to family-office services to the ultra-affluent.

On the asset-management side, Bank of America adds Merrill's 50% share in BlackRock's $1.26 trillion under management on 30 September 2008 to the $564 billion it managed on the same date, principally through its Columbia Management subsidiary.

Merrill decided to give up 94 years of independence and become junior partner to retail-banking giant Bank of America in mid September 2008. Coming just as the headlines were screaming about Fannie Mae, Freddie Mac, Lehman Brothers and AIG, the initial consensus was that Merrill CEO John Thain was very clever for finding a nice deposit-rich port in a gathering storm of sub-par assets that seemed liable to flatten every investment bank in sight.

Within days of the firms' agreeing to tie the knot, however, the U.S. government started talking about a "$700-billion" bailout package for wobbly financial institutions. So far that package has come closer to $2.7-trillion mark in stimulus and risk-mitigation outlays -- with another $5 trillion untapped but earmarked to the task of keeping financial-service providers from going navel up.

When the acquisition was first announced, the price tag for Merrill was about $50 billion. But by the time the deal closed, erosion of Bank of America's stock price brought it closer to the $24-billion mark. -FWR

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