Summary
Financial institution acquisitions are different from strategic purchases. For banks to acquire, they are looking to expand geographically . The synergies are typically overhead and overlap in costs. If the cuts are too deep, in this case pension, tension among the newly acquired personnel can get tight. This could cause a loss of business should employees decide to leave.
Analysis
Ever since Black Monday rocked the investment world in the late 80's, banks and investment firms have been looking for ways to aggressively expand their business...new products, new services, switch from interest rate to fee based revenue, expanding geographically . When financial institutions acquire one another, its typically for the seller's book-of-business .
The synergies among banks, unlike strategic acquisitions where the products compliment, is to cut costs and overlap in personnel. The problem here is that Blackrock maybe cutting too deep. When I was in the brokerage business 20 years ago, the statistic was 57% of a broker's portfolio followed him to different houses. If this still holds true and Blackrock could be facing a mass exit from its newly acquired business, they stand to loose a great deal of business.
Chances are Blackrock will find a resolution to the pension issue, but will most likely find other areas to cut costs. This way they can keep the troops happy and hand-pick who or where they want to eliminate
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
