Bank of America-Merrill Lynch

Posted: 2 Jun 2010

See all articles by Guhan Subramanian

Guhan Subramanian

Harvard Business School

Nithyasri Sharma

Harvard Business School

Date Written: May 24, 2010

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 5th, 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 22nd, 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?

Suggested Citation

Subramanian, Guhan and Sharma, Nithyasri, Bank of America-Merrill Lynch (May 24, 2010). HBS Case No. 910-026, Harvard Business School NOM Unit, Available at SSRN: https://ssrn.com/abstract=1619346

Guhan Subramanian (Contact Author)

Harvard Business School ( email )

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Nithyasri Sharma

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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