Vulture sweepstakes: Merrill Lynch vs. Lehman Brothers


The financial crisis of the late 2000s gave rise to a vulture sweepstakes, as the big banks competed to pick up the best of the fallen banks left for dead. So who fared the best? Was it JPMorgan Chase with its deal for Bear Stearns and Washington Mutual? Wells Fargo for its acquisition of Wachovia? Bank of America's deal for Countrywide and Merrill Lynch? While the Bank of America-Countrywide deals will go down in history as one of the worst ever deals ever, the crown for best deal has yet to be decided. The Deal Professor takes a look at the Bank of America-Merrill Lynch deal and the Barclays-Lehman Brothers deal.

The winning deal is not obvious on the surface. As the professor notes, Bank of America is definitely benefitting from Merrill Lynch, which is among the main positive contributors to earnings and revenues. On the surface, the operations of the old firm are faring well. But Bank of America also took $900 billion of assets onto its balance sheet, and that has proven to be a real albatross, as a lot of those assets have turned toxic. Meanwhile, Barclays regulators denied the bank's move to buy Lehman assets before it went bankrupt, which proved to be the difference. By buying the working assets via the bankruptcy process, it was able to take on all the working parts and leave behind the toxic stuff. For Barclays, the move allowed it to boost its U.S. investment banking operations in an unencumbered way, which Bank of America cannot claim.

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