The financial crisis has produced some
wild mood swings in parts of Charlotte, N.C., also known as Banktown. As Yvette Kantrow observed Monday on Dealscape, first came the triumphalism over news that hometown titan Bank of America Corp. will buy New York-based Merrill Lynch & Co. Monday it was despair that the retail banking operations of Wachovia Corp., the other major local pillar of finance, will go to New York-based Citigroup Inc.
So is the score now tied at New York 1, Charlotte 1? On a superficial level, maybe. But a look at the integration plans and priorities for these two deals -- insofar as they're known at this point -- shows something more complicated going on.
In both deals the acquirer is getting a capability where it lags future rivals in a big way. So even though both integrations will feature painful layoffs, cost cuts and perhaps culture clashes, there's a delicate balance of power that the acquirer will need to respect -- or risk damaging what it bought.
BofA, whose presence in wealth management and investment banking is modest compared to Merrill's, needs key Merrill managers on board to make the deal work. Merrill brokers are thought to be particularly at risk of bolting. Thus a forced march to North Carolina for anyone seems highly unlikely -- and layoffs in some key areas seem more likely on the BofA side than at Merrill. This would be a departure from past integration practice at BofA, but BofA has never done a deal like this one.
Meanwhile Citi, for all its global scale, is a mere middleweight in U.S. retail banking without Wachovia, one of the heavyweights. No wonder Citi CEO Vikram Pandit wants the retail banking operations of the combined bank
based in Charlotte. Hey, it's a lot cheaper there too, even if the financial crisis is freeing up some New York real estate.
So while a few observers may insist on crowing or moaning, and while more than a few employees will have the misfortune of losing their jobs, a lot of folks will be busy just trying to make these combinations work -- based, one hopes, less on regional loyalties and more on what it takes to build strong financial institutions. We could use a few more of those. -
Kenneth Klee
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