Panicked Merrill (MER) Ran To Goldman (GS) First

Sorry, Ken Lewis. You were Merrill’s third choice.

As Merrill’s senior management and board panicked over the weekend, the firm pursued three options: the sale of 9.9% stake to Goldman (GS), a merger with Morgan Stanley (MS)…and then, finally, the sale of the whole firm to Bank of America (BAC). WSJ:

Top Merrill Lynch & Co. executives explored selling a minority stake in the brokerage firm to Goldman Sachs Group Inc. this past weekend before deciding to negotiate a planned acquisition by Bank of America Corp., according to people familiar with the matter.

Peter Kraus, a Goldman alumnus who heads strategy at Merrill, talked with Goldman about the idea Saturday and early Sunday, two of the people said. John Thain, who became Merrill chief executive last December, is a former Goldman president. Goldman was interested in Merrill’s wealth-management business, according to a person close to the firm.

At points, the Merrill executives were hoping to keep the firm independent. Those hopes evaporated as Merrill executives tried to come to grips with their own firm’s fate even as they saw chances fade for a rescue of Lehman Brothers Holdings Inc.

Merrill President Gregory Fleming, a 16-year veteran of the firm, and other supporters of a takeover by Bank of America urged the Goldman alumni to pursue the bank deal after “a very pointed discussion” with Mr. Kraus, the same person said. Mr. Fleming and others argued that the sale of as little as 9.9% of the firm to Goldman might not be enough to right the listing ship.

Merrill executives briefly broached a possible merger with Morgan Stanley, though those talks didn’t go anywhere.

And the existence of these other “options”, which–unbeknownst to Ken Lewis–were DOA, probably explain why Ken paid $29 for Merrill instead of the $15 he’d have gotten it for if he’d waited another day.

See Also: BOFA Shareholders Wake Up, realise They Paid Way Too Much For Merrill

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