Sep 15 2008
Lehman sank, Merrill sold…
Bank of America, the second largest bank in America in accordance to its asset size in a major development is all set to buy Merrill Lynch in a deal that has valued Merrill Lynch at a figure of US$ 29 per share. This deal has valued Merrill at US$ 44 billion which is almost half of the value that the investment firm was worth when it was at its peak performance last year. Through this deal Bank of America has added another feather to its hat which has lately been on a major acquisition drive. This particular corporate combination deal is been seen with much hope to find respite from the ongoing credit crisis. The bank was interested in this investment firm since long and was also speculated of showing interest in the investment firm of Lehman Brothers too. But the absence of a guarantee or a propped funding option on behalf of the US Federal regulators keeping in mind the risky state of assets Lehman Brothers has reached; the bank finally decided to pull back and not continue further with the Lehman option.
In other news, what is speculated to be fallout to this corporate inking, in the presence of limited options, Lehman Brothers have confirmed their intentions of filing for Bankruptcy. This filing will be carried out by the holding company without involving any of its several subsidiaries. Meanwhile the firm is still supposed to be on a look out for a deal regarding the sale of its broker-dealer operations as well as the sale options for its asset management unit. Lehman’s meltdown will mark the biggest implosion to hit the investment banking sector in nearly two decades and will take away nearly 25 thousand jobs in its fold. The US Securities and Exchange commission has given hope that it will work hard towards providing extensive protection to the customers of Lehman Brothers and will do whatever it can to minimize the impact or blow of this development on the customers of the company. These developments regarding Merrill and Lehman come only 6 months after JP Morgan was taken over by Bear Stearns. All these moves go on to suggest the volatile credit times hitting the investment sector at this point of time. The lack of confidence awakened by the financial crisis has lead to a drying up of liquidity which in turn has resulted in increasing borrowing costs and a subsequent tighter credit environment.