My opinion is that Ken Lewis did the best he could with a bad situation. [/quote]
Ken Lewis CREATED HIS OWN bad situation(s). He didn’t have to even approach Merrill. Owning Merrill was completely unnecessary from a strategic standpoint. He didn’t have to buy Countrywide. Everyone on this board had an inkling that Countrywide was an abortion before Ken Lewis decided to buy it.
Ken Lewis was just totally and completely wrong about how bad things were in his own business and he tried to expand when he should have been hoarding his acorns and delevering. It’s as simple as that. They should have fired his ass a LONG time ago.[/quote]
All about ego for that guy who wanted to overcome perceptions of being king of the little hillbilly town by becoming king of ML and NYC. BofA had nearly 10% of bank deposits at one point, so there was no way FED could shut them out.
Finally a B-school prof tells it straight up:
“Why did Ken Lewis make the Merrill deal, and why did he so completely bungle it?
I believe there are two primary reasons. The first is all about emotions. Lewis had been the right-hand man to McColl, who really built Bank of America into the banking powerhouse it became. What could be a bigger trophy than Merrill Lynch? That’s how you can explain the single weekend of hectic due diligence, amid pressures from all sides, as the sale went through. Why would any experienced CEO who knows how to do acquisitions agree to a deal with so little information? Because he was buying a dream of a company, one that had an enormous emotional attachment for him personally. McColl had never acquired Merrill. Now Ken Lewis could do it. Wow.
The second reason why Lewis bought Merrill Lynch and destroyed his own company is all about experience–the wrong experience. If you look at earlier deals Bank of America made under both McColl and Lewis, they had two primary defining attributes: The companies acquired were all in mainstream banking, and the economy was not in severe distress. This was as true for NationsBank’s acquisition of BankAmerica as it was for Bank of America’s acquisition of FleetBoston. There was an established playbook for these takeovers: Cut overhead costs, consolidate assets, build bulk to fend off competitors and create new business opportunities.
When it came to Merrill, and also to Lewis’s takeover of Countrywide Financial earlier in 2008, for that matter, that playbook no longer applied”
Sydney Finkelstein is a professor of strategy and leadership at the Tuck School of Business at Dartmouth, and the author of Think Again: Why Good Leaders Make Bad Decisions (Harvard Business Press, 2009).
