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  • March 2010 (Revised January 2012)
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Bank of America-Merrill Lynch

By: Guhan Subramanian and Nithyasri Sharma
  • Format:Print
  • | Pages:17
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Abstract

In September 2008, as Lehman Brothers struggled to survive, John Thain, CEO of Merrill Lynch, realized that his bank was also on the brink of failure. Throughout the weekend of September 13–14, 2008, Thain successfully negotiated a deal with Ken Lewis, CEO of Bank of America, for BofA to acquire Merrill. However, throughout the fourth quarter of 2008, Merrill's financial condition deteriorated at an alarming rate, with expected 4Q08 losses ballooning from $5.3 billion in November to over $12 billion by mid-December. Shareholders of both companies approved the deal on December 5, 2008, but soon after, Lewis telephoned Fed officials and declared he would invoke the MAC clause to exit the deal unless Fed officials provided government financial assistance. Fed officials instructed Lewis to "stand down" and not to invoke the MAC clause. As he convened his Board on December 22, 2008, Lewis had to make a decision. Should he close the deal "for the good of the country?" Or should he declare a MAC and exit the deal, potentially invoking the wrath of the U.S. government. Was there another way?

Keywords

Mergers and Acquisitions; Financial Crisis; Financing and Loans; Negotiation Deal; Business and Government Relations; Banking Industry; United States

Citation

Subramanian, Guhan, and Nithyasri Sharma. "Bank of America-Merrill Lynch." Harvard Business School Case 910-026, March 2010. (Revised January 2012.)
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About The Author

Guhan Subramanian

Negotiation, Organizations & Markets
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Related Work

    • June 2013
    • Faculty Research

    Bank of America-Merrill Lynch

    By: Guhan Subramanian and Charlotte Krontiris
Related Work
  • Bank of America-Merrill Lynch By: Guhan Subramanian and Charlotte Krontiris
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