Bank of America acquires Merrill Lynch (2008)
Bank of America agreed to buy Merrill Lynch for $50 billion in stock the weekend Lehman Brothers collapsed. CEO Ken Lewis pitched the deal as a once-in-a-generation chance to fold a top investment bank into a commercial banking giant.
The deal closed in January 2009. Merrill produced surprise losses, triggering federal aid and shareholder lawsuits over disclosure.
Merrill became the core of Bank of America's wealth and capital markets business and now generates a large share of the firm's fee income. The integration eventually worked, but at high political and financial cost.
It is the canonical case of a commercial bank buying a Wall Street firm to add fee income. The lesson cuts both ways: the strategy can pay off long-term, but cultural and risk-management costs run deeper than acquirers expect.
