Bank of America Acquisition of Merrill Lynch - Essay Example

Bank of America Acquisition of Merrill Lynch Before its acquisition by Bank of America, Merrill Lynch was an organization that mainly focused on brokerage, investment banking (Matthew, Carrick and Dan 12). Based at the 7 Wall Street, New York City, Merrill Lynch is strategically located with respect to customer access. The United States is a populous country in which the brokerage business greatly thrives with a strong economy. Given the strength of the US economy, Merrill Lynch had a strong and stable customer base which it readily captured to its advantage as it engaged in the purchase of property and investment in other sectors of the economy.

The investing and securities industry in the United States is quite successful with its level of growth before the recession being astronomic over the past couple of years. The country maintained a distinct difference between commercial and investment banks before 1999. This in effect means that the industry enjoyed massive benefits as the banks concentrated only on certain banking activities without competing much with the players in the investment banking industry. On the other hand, the industry includes approximately 3000 companies which have total revenue of close to 200 billion dollars (Hoovers par 1).

The investment banking industry is much concentrated with the first 50 major players accounting for close to 90% of the industry’s earnings according to Hoovers (par 1). The investment banks commonly target those who have property which include land, buildings and other fixed assets the main customers being the middle class (Perkins 14). Some of the main competitors of Bank of America in its acquisition of Merrill Lynch include Wells Fargo and Company, The Goldman Sachs Group Incorporated and JP Morgan Chase and Corporation, and Citigroup.

Bank of America Merrill Lynch is considered the world’s largest brokerage having at least 15000 brokers and a client asset base of about 2.2 billion dollars. In this regard, it fairs competitively compared to its main competitors both in the investment and brokerage ventures. Bank of America in itself has remained for long the second most capitalized bank in the United States. The bank serves more than 150 countries and has relationships with many Fortune 500 companies (Matthew, Carrick and Dan 14).

In terms of total revenue, the Bank of America is 5th largest in the USA. There are several small brokerage firms that are far less capitalized in the US which little threaten the establishment of the Acquisition. The main competitors in the market including Wells Fargo and Company, The Goldman Sachs Group Incorporated and JP Morgan Chase and Corporation, and Citigroup are well established both within and outside of the United States. Given that the main competitors of Merrill Lynch were less affected by the national housing crisis and mismanagement issues, they have a better reputation (Stiles 23).

The other companies also have international presence in some countries where Bank of America - Merrill Lynch has no presence. In this respect, the competitors are better established in such countries and would have better competitive advantage if the Bank of America joined the same markets. The profits made by investment banking and brokerage players have continuously attracted new entrants into the market. This state of events has seen the profit margin for the firm declining as the entrants tend to provide cheaper services.

Works CitedMatthew Karnitschnig, Carrick Mollenkamp and Dan Fitzpatrick (2008) "Bank of America Reaches Deal for Merrill". The Wall Street Journal. Stiles, Paul Riding the Bull: My Year in the Madness at Merrill Lynch. New York: Times Business. 1998.Perkins, Edwin Wall Street to Main Street: Charles Merrill and Middle-Class Investors. New York: Cambridge University Press. 1999.Hoovers (2010) Investment Banking, Viewed 2nd November, 2010 http://www.hoovers.com/industry/investment-banking/1308-1.html