CASE STUDY

Merger



Table of Contents

Introduction1

Circumstances of the Bids2

Valuation of the Target3

Position of other Players in the Bid3

The Actual Bids and Perceived Synergies4

Cost Synergies4

Revenue Synergies4

Contingency Plans5

Establishing an Urgent Position Administration Team5

Appointing Strategic Groups for Scenario Analysis5

Role of Bankers in the Bid6

Defenses to the Bid6

Impact of Acquisitions on the New Merged Entity6

Future for the merged entity7

Corporate Social Responsibility7

Conclusion8

Recommendations8

References10

Merger

Introduction

One of the mergers that took place recently was between The Bank of New York, which is the oldest banking corporation in the United States that was established by Alexander Hamilton in 1784 and Mellon Financial Corporation. The Bank of New York Mellon Corporation came into existence after the merger of these two companies in 2007. The merged company is a global financial services company that employs more than 48,000 people worldwide. The company holds assets worth US $1.2 trillion and six financial services are operated in the financial sector, names of which are mentioned below.

1.Asset management

2.Asset servicing

3.Wealth management

4.Broker-dealer

5.Advisory services

6.Issuance services

7.Treasury services (Bank of New York 2011, pp. 1).

The target market to which the company serves its offerings are corporations, private clients and consultants.

1.Corporations - The Bank of New York Mellon Corporation helps the corporations in building assets and in enhancing their performance. Moreover, they also assist the corporations in improving operating efficiency and in reducing risk by providing its services and solutions.

2.Private Clients - Financial solutions such as investment and wealth management are offered to individuals.

3.Consultants and Advisors - Assistance is provided to the consultants by choosing their best service that meets the needs of the clients they serve.

Circumstances of the Bids

The merger between these two companies was announced in December 2006 which created the largest securities servicing, as well as the asset management firm in the world that owned assets of $20 trillion (Rowe 2007, pp. 8). Moreover, the corporate trustee had assets worth of $8 trillion under trusteeship. This has also enabled it to lead US cash management as well as global payments provider. Annual revenues of $13 billion are earned by the company, and the operations of the company are in more than 37 countries and sever more than hundred markets (Porter 1996, pp. 61).

Terms and conditions of the deal were announced according to which the shareholders received 0.9434 shares in The Bank of New York Mellon Corporation for each share that was owned by them, and the shareholders of Mellon received one share in the new company that was formulated. The merged company was formed on the basis of mutual, stock option for 19.9% of the issuer's outstanding common stock. After the merger, the two financial institutions that were previously sold by the retail banking divisions were also bought together. This happened because the retail banking division was sold by Bank of New York in 2006, to JP Morgan Chase while the retail banking division of Mellon was sold in 2001 to RBS.

Valuation of the Target

The shares of the company were valued according to the common stock that was issued to the shareholders. Valuation of merger target was done by the ...