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As Goldman Bagged Clients, Merrill Bagged Itself
Posted By Invictus On March 2, 2010 @ 1:00 pm In Bailouts,M&A | Comments Disabled
As a stark counterpoint to How Goldman Sachs Bagged Clients , I recall ever so fondly how Merrill Lynch bagged itself: With a Sept. 2006, top-of-the-market, $1.3 billion acquisition  of sub-prime originator First Franklin from National City:
First Franklin is one of the nation’s leading originators of non-prime residential mortgage loans through a wholesale network. [...]
“This transaction accelerates our vertical integration in mortgages, complementing the three other acquisitions we have made in this area and enhancing our ability to drive growth and returns. We look forward to working with the experienced teams at these companies to serve their clients and leverage our broad range of mortgage products and services.” — Dow Kim, president of Merrill Lynch’s Global Markets & Investment Banking Group
A close friend who was in the employ of seller National City told me at the time that they couldn’t believe their good fortune at having found a buyer for their turd factory. (National City itself was eventually picked up on the cheap  by PNC.)
The operation was being wound down  about one year later, representing what might be one of the all-time boneheaded acquisitions in corporate history.
The saddest part of all is that Merrill had a chief economist — David Rosenberg — who was screaming about an inflating housing market bubble  [PDF]. Had they listened to their own economist — not an unreasonable thing to do — Merrill could have come out smelling like a rose. Instead, they chose to ignore Rosie and plough headlong into what would have undoubtedly been bankruptcy if not for B of A.
Article printed from The Big Picture: http://www.ritholtz.com/blog
URL to article: http://www.ritholtz.com/blog/2010/03/as-goldman-bagged-clients-merrill-bagged-itself/
URLs in this post:
 How Goldman Sachs Bagged Clients: http://www.ritholtz.com/blog/2010/03/goldman-sachs-bagged/
 $1.3 billion acquisition: http://www.ml.com/index.asp?id=7695_7696_8149_63464_70786_70780
 picked up on the cheap: http://www.usatoday.com/money/economy/2008-11-01-4054125678_x.htm
 was being wound down: http://www.thestar.com/Business/article/257444
 housing market bubble: http://www.blah3.com/The%20Market%20Economist%20080604.pdf
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