The Merrill Deal Doesn't Look Too Hot Now

The 'American Banker' may have been a little hasty in awarding Bank of America CEO Ken Lewis its 2008 'Banker of the Year' Award. Some say that getting $45bn for Merrill Lynch in this environment truly qualifies Merrill CEO John Thain for the accolade.

As The Wall Street Journal points out, BofA picked up Merrill for what was at the time 1.8 times tangible book value. To put things into perspective, Goldman is now valued at 0.8 times tangible book, whilst Morgan Stanley is coming in at 0.4 times. Given the slowdown in the global economy is likely to affect the combined firms' retail brokerage operations, and that investment banking looks like going into a terminal-like decline in 2009, Bank of America now looks to have grossly overpaid. And that's what investors clearly feel, as BofA's stock has fallen around a third over the last few weeks.

And some interesting stuff about the Lehman bankruptcy has emerged. The Telegraph reports that the 300 PricewaterhouseCoppers staff working on the wind-up are currently pulling in around $5.9m in compensation a week, whilst the 1,100 Lehman bankers still on the payroll are making $3m (the Lehman guys will have retention bonuses to look forward too though). The task of winding up Lehman, however, is a daunting one. The administrators have now described it as '10 times as big and complicated as Enron'. And Reuters is reporting that Lehman Brothers Holdings has sought court approval to reach out to some of its former European staff as its apparently wants their help in unwinding billions in assets that currently 'sit unmanaged'.

Finally, The Financial Times reports that many hedge funds will have received redemption requests from investors in the last few days, as the 'mad rush for liquidity' continues.

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