Things are certainly progressing at a very fast pace. I find it inconceivable that Bank of America (BAC) would step up and buy Merrill Lynch (ML) on such short notice. ML is heavily exposed to the same stuff as Lehman, and we know that today (Monday) is going to see some heavy trading in the derivative markets as a result of the bankruptcy filing by Lehman.
Who would buy a company so fast and under such circumstances? Well, BAC for one, although I am intrigued by what sort of pressure (or agreements) the regulators applied to the situation.
Conventional wisdom says that bold acquisitions made when there is blood in the streets are one of the prime ways to grow your business and make a killing. At this stage, I am not yet ready to believe this move by BAC represents such an event.
In my mind, it is equally likely that they jumped the gun and bought something worth far less than they paid. We shall see.
[quote]
Merrill Lynch, the world’s largest broker, agreed to be acquired by Bank of America for $29 a share, or $43.5 billion, after being pressured into a deal by federal regulators.
Morgan turned down a possible acquisition because it couldn’t examine Merrill’s books in 48 hours, a person close to the matter said.
"Merrill Lynch has significant exposures and Bank of America would need enough balance sheet to handle that."
Meckler also noted that the due diligence Bank of America would need to do on Merrill’s books would be a serious undertaking, given the complexity of the company’s exposure to mortgage-related securities and other complex debt.[/quote]
At any rate, count me as ‘stunned’ at how fast events transpired for ML. The speed of this deal speaks volumes about what is going on behind the scenes right now.
by ianp123