Bofa Merrill Merger

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Bank Of America’s acquisition of Merrill Lynch Along with the fire sale of Bear Stearns and the bankruptcy of Lehman Brothers, the rescue of Merrill lynch confirmed the worst fears about the financial crisis. After a weekend of whirlwind deal-making, Merrill Lynch had sold their troubled brokerage firm to the Bank of America Corporation, dodging the financial sinkhole that was swallowing Lehman Brothers. As per some current and former Bofa executives and employees, the merger was really messy. On Saturday, September 13, Ken Lewis (Bofa CEO) and John Thain(Merrill CEO) met to discuss a strategic relationship. Thain proposed a 10% percent minority investment in Merrill, but Lewis wanted complete acquisition. In next two days both parties negotiated the terms of the merger. The deal was constituted a hefty 70 percent premium over the previous Friday’s closing share prices of the Merrill and valued Merrill at a multiple of 1.8x tangible book value. By Sunday afternoon, both boards approved the merger. By the time the Merrill acquisition was announced on Monday, September 15, the stock market crash was well underway. The S&P 500 index was down 24 percent from its October 2007 historic highs. A few weeks later, in October 2008, the equity market fell off the cliff and the S&P 500 index was down 43 percent from the year before. The stock market crash reflected broader economic problems such as the crash of the housing market, disturbances in the credit markets, global recession and increasing unemployment. According to Ben Bernanke, a prominent scholar of the Great Depression and current Chairman of the Federal Reserve, “the financial shocks that hit the global economy in September and October were the worst since the 1930s. On November 5, 2008, Merrill reported 3Q loss of $8.25 billion. In late November 2008, the FED approved the merger and on December 5, the

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