BofA Becomes King Of Brokerages With Purchase of Merrill Lynch
As it became more apparent that the 158-year-old investment firm of Lehman Brothers would succumb to bankruptcy, Merrill Lynch’s CEO John Thain saw the writing on the wall. Already pummeled by toxic mortgages, falling stock prices and nearly $20 billion in losses over the past four quarters, Merrill Lynch was likely next in line to fail.
To prevent a fate similar to Lehman, within 42 hours Thain and others orchestrated a plan to sell the 94-year-old brokerage firm - the world’s largest - to Bank of America in all-stock deal worth $50 billion. The transaction is the seventh-largest bank acquisition to be announced, according to Thomson Reuters.
The deal itself is expected to close in early 2009. Under the terms of the transaction, three directors of Merrill Lynch will join Bank of America’s Board of Directors. Bank of America will retain the Merrill Lynch name for the retail brokerage.
For Bank of America, already the largest retail bank and credit card issuer in the country, the acquisition of Merrill Lynch is viewed as strategic business move. The combined company will now have leadership positions in retail brokerage and wealth management. By adding on Merrill Lynch’s 16,000 financial advisers, Bank of America becomes the largest brokerage in the world, with more than 20,000 advisers and $2.5 trillion in client assets.
The acquisition of Merrill Lynch is not the first major purchase for BofA this year. In January, the company agreed to buy troubled mortgage lender Countrywide Financial Corp. for $2.5 billion. As in the purchase of Merrill Lynch, it was an all-stock transaction.
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