The big mistake Bank of America CEO Ken Lewis made when buying Merrill Lynch, in our opinion, was paying tens of billions of dollars for a firm that would have been worth nothing a few days later.
Had Lewis waited, he could likely have gotten the firm for next to nothing, thus saving his shareholders the massive dilution that has crippled Bank of America’s stock in the year since the deal.
Greg Farrell of the FT reveals that at least one BOFA board member had the same concern about Merrill and was initially against the deal. Shortly thereafter, this board member almost lost his seat on the board.
The director guiding the search for Bank of America‘s next chief executive came close to losing his board seat last year after questioning the Merrill Lynch acquisition, according to a person familiar with the matter.
Chad Gifford, former chief executive of Fleet Financial, the bank acquired by BofA in 2004, was a voice of dissent at a board meeting in September 2008 when Ken Lewis, BofA chief executive, said the bank would buy Merrill Lynch, according to testimony given by Mr Gifford before a House committee.
Mr Gifford, who ultimately went along with the acquisition, said the impending bankruptcy of Lehman Brothers would wreak havoc in the markets and wanted to know why Mr Lewis could not wait at least a few more days before striking the Merrill deal, according to a person familiar with the meeting.