Mellon Financial and the Bank of New York Harvard Case Solution & Analysis

Mellon Financial and the Bank of New York Case Solution

Overview

The case describes the situation of proposed merger between the Bank of New York Inc. and the Mellon Inc. in the year 2006. The two separate entities are considered equal therefore, this merger is also referred to as the Merger of Equals. The name of the new company after the merger would be Bank of New York Mellon Inc. with the symbol of BK on the New York Stock Exchange.

However, this merger was not proposed for the first time by the Bank of New York, as it was proposed on the friendly terms in 1995 and 1996 as well but due to some issues it didn’t succeed. The two businesses are quite complementary to each other. The Bank of New York was a leader in the securities servicing business whereas, the Mellon Inc. was a market leader in the asset management. With this merger, the Bank of New York Mellon would provide its clients with one stop solution for all their financial needs by providing the asset and wealth management, issuer services, asset servicing, clearing and execution services as well as treasury services in major markets of the world.

There were numerous concerns of the two companies regarding this merger. With this merger, there would be significant synergies arising due to the global expansion which could result in increased growth for the new company. One of the concerns was related to the culture of the two businesses. Due to the merger of equals, there was a cultural fit as well as it not only resulted in the economies of scale however, due to its complementary nature the revenues also increased.

Having said with the advantages of the merger, there would be some risk of losing the potential customers for the business which is estimated to be 10% of the pre-client merger. Moreover, as it is the stock for stock merger, the exchange ratios proposed are also the key point for the acceptance of the shareholders.

Issue Identification

Despite of the increased benefits which could be possible in this proposed merger, there are some issues regarding the viability of the merger in the eyes of the Mellon shareholders regarding the earnings available after this merger. Moreover, the amount of synergy that would be assigned to the shareholders of the two companies by considering the exchange ratios also needs to be identified.

Analysis and Evaluation

The merger between the Bank of New York and the Mellon Financial could create synergies which can significantly help in cutting the operating the costs of the business as a combined whereas, the biggest advantage would be that the players who were previously competing with each other over the prices would now become one player with the increased size, capabilities and the skills to better capture the market as a whole and provide the competitive edge in the industry.

However, the merger could result in losing the potential customers of the business by 10%. The two businesses would provide the complementary services for each other. The customer servicing department of the Bank of New York was quite worse which could be settled by this merger which could result in greater customer approval. With the addition of the customers in the business, the investors would also be attracted to invest. It can be seen that the merger could result in the cost saving of $ 700 million.

With this merger, the new company could enter into new market with the increased customers from the main markets of the world which would results in the increased revenues for the company in the future...............

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