“It is a core competency,” Bank of America CEO Ken Lewis says. “We know how to manage transitions.”
Announcing the acquisition in New York, Lewis wore a broad grin in describing what he called “the strategic opportunity of a lifetime” to merge the world’s most renowned retail brokerage force with one of the country’s largest consumer banks.
“We know we have a lot of hard work in the transition,” Lewis said. But he was confident that the company could manage the change smoothly.
Since Lewis became CEO in 2001, Charlotte, North Carolina-based Bank of America has made a slew of acquisitions, growing the company’s employee base from 143,000 to more than 206,000, according to company filings. In 2004, the bank bought FleetBoston Financial for $47 billion, followed a year later by credit card company MBNA for $35 billion and US Trust for $3.3 billion.
The mortgage crisis claimed Lehman Brothers and its 25,000 employees as its latest victim when it declared Chapter 11 bankruptcy September 15. Bank of America, meanwhile, has been on something of a shopping spree. In addition to its purchase of Merrill Lynch, the bank completed a $4 billion acquisition of mortgage lender Countrywide this summer.
Lewis and Merrill Lynch CEO John Thain, appearing together to announce the September 15 purchase, said the deal complemented the strengths of the two companies. Merrill Lynch’s 16,690 advisors—the company’s iconic “thundering herd” of brokers—would give Bank of America a Wall Street perch to sell brokerage services to the bank’s large base of high-net-worth customers.
An executive at Bank of America says the company’s human resource executives would employ previously developed processes to bring the new workforce into the bank’s existing business infrastructure and culture.
“People at Bank of America are used to [acquisitions],” says Peter McKillop, senior vice president for banking communications at the bank’s global consumer and small business unit. “It’s happened over and over again.”
In past acquisitions, HR executives at Bank of America have worked with their counterparts at the acquired company to develop transition teams, McKillop says. These groups, which are composed of hundreds of employees, will again engage in what the company calls a “tollgate” analysis—a phrase borrowed from the quality-improvement process Six Sigma.
The tollgate process weeds out redundancies, identifies gaps and streamlines the business, says McKillop, who helped manage the transition during the acquisition of MBNA.
The company says it has identified $7 billion in efficiencies it believes the new acquisition will achieve by 2012. The company indicated it would merge Merrill Lynch’s brokers with its own, creating a workforce of about 20,000 advisors.
Few details of the new Merrill Lynch have been announced, other than the company will retain its name and headquarters for its wealth management business in New York.
Thain’s replacement of Merrill Lynch CEO Stan O’Neal late last year helped restore order to the brokerage, Bank of America executives say. They were optimistic his efforts would smooth the transition even as Thain lamented that he didn’t think the company’s 94-year history would end this way.
“This is not at all the outcome I would have expected when I took this job,” Thain says.