Which financial deal is the worst in history?


When it comes to the worst deal in history, a New York Times article sets up an interesting debate: Is it the AOL deal to buy Time Warner in 2000, or is it the Hewlett-Packard deal for Autonomy last year?

There's a strong case to be made for both when you look at the sheer destruction of value. HP paid $11.1 billion for the British software maker, and it wrote down recently a whopping $8.8 billion, generating massive headlines, as it accused the software maker of accounting irregularities. HP shares have fallen nearly 60 percent since the deal was announced.

As for AOL-Time Warner, at the time the deal was announced in January 2000, "the combined value of the two companies was more than $300 billion. By the time Gerald Levin announced that he was stepping down as chief executive of AOL Time Warner in December 2001, the value of the company was about $159 billion, down nearly 50 percent," the Times notes.

These are horrible deals and the debate is legitimate. But I think the Bank of America-Countrywide deal deserves some mention as perhaps the worst of all time. Bank of America bought Countrywide in 2008 for $4 billion, which then CEO Ken Lewis, whose career subsequently foundered, touted the transaction as a real coup for the bank. But since then, the costs have surged steadily.

As of now, the bank has been forced to write-off more than $40 billion, mainly in retail real estate, litigation and settlement costs with government authorities. The legal tab could rise even more, as there are tricky cases that may require more additions to reserves still working toward resolution. As for the stock price, in January of 2008, when the deal was announced, the stock hit $45 a share. Now it trades below $10 a share. You can't attribute all of that to the Countrywide deal, of course.

So what do you think? Perhaps we can all agree that it was the worst ever deal in the financial services industry and leave it at that.  -Jim

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