Chpt_12.Presentation Merrill Lynch & Co

8/3/2019 Chpt_12.Presentation Merrill Lynch & Co

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Merrill Lynch & Co.: TheMerrill Lynch & Co.: TheBusiness Case for Global ITBusiness Case for Global IT

ConsolidationConsolidation

Group 5Group 5 Case 4Case 4


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Team MembersTeam Members

Nina WolfNina Wolf

Jessi JanisJessi Janis

Elizabeth CatesElizabeth CatesEric YoungEric Young

Yvonne HildebrandYvonne Hildebrand


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Jessi JanisJessi Janis 33

Stan O'Neal, chairman, chiefStan O'Neal, chairman, chiefexecutive and president; member,executive and president; member,

Operating Committee.Operating Committee.Mr. O'Neal becameMr. O'Neal becamechief executive officerchief executive officerin December 2002,in December 2002,

and chairman of theand chairman of theboard in April 2003. Heboard in April 2003. Hehas been a member ofhas been a member ofthe board since Julythe board since July2001, when he was2001, when he wasnamed president andnamed president and

chief operating officer.chief operating officer.He joined Merrill LynchHe joined Merrill Lynchin 1986 as a director inin 1986 as a director inInvestment BankingInvestment Banking


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Jessi JanisJessi Janis 44

About Merrill LynchAbout Merrill Lynch

One of the world's leading financial managementOne of the world's leading financial managementand advisory companies, with offices in 35and advisory companies, with offices in 35countries and private client assets ofcountries and private client assets of

approximately $1.1 trillion.approximately $1.1 trillion.As an investment bank, it is a leading globalAs an investment bank, it is a leading globalunderwriter of debt and equity securities andunderwriter of debt and equity securities andstrategic advisor to corporations, governments,strategic advisor to corporations, governments,

institutions and individuals worldwide.institutions and individuals worldwide.Through Merrill Lynch Investment Managers, theThrough Merrill Lynch Investment Managers, thecompany is one of the world's largest managerscompany is one of the world's largest managersof financial assets.of financial assets.


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Eric YoungEric Young 55

Products and ServicesProducts and ServicesMerrill Lynch & Co., Inc., is a Delaware corporationMerrill Lynch & Co., Inc., is a Delaware corporation

that, through its subsidiaries and affiliates, providesthat, through its subsidiaries and affiliates, providescapital markets services, investment banking andcapital markets services, investment banking andadvisory services, wealth management, assetadvisory services, wealth management, assetmanagement, insurance, banking and related productsmanagement, insurance, banking and related productsand services on a global basis.and services on a global basis.

Merrill Lynch offers these products and services toMerrill Lynch offers these products and services toindividual investors, businesses of all sizes,individual investors, businesses of all sizes,governments and governmental agencies as well asgovernments and governmental agencies as well asfinancial institutions. Merrill Lynch is organized intofinancial institutions. Merrill Lynch is organized intothree interrelated businesses:three interrelated businesses:

1.1. Global Markets and Investment Banking Group (GMI)Global Markets and Investment Banking Group (GMI)

2.2. Global Private Client Group (GPC)Global Private Client Group (GPC)

3.3. Merrill Lynch Investment Managers (MLIM)Merrill Lynch Investment Managers (MLIM)


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HistoryHistory

19071907:: CharlesCharles EE.. MerrillMerrill arrivedarrived inin NewNew YorkYork filledfilled withwith dreams,dreams, determineddeterminedtoto makemake aa namename forfor himselfhimself.. HeHe metmet EdmundEdmund CC.. Lynch,Lynch, andand aa greatgreatpartnershippartnership beganbegan..19141914:: OnOn 66 January,January, CharlesCharles EE MerrillMerrill && CoCo.. opensopens itsits doorsdoors.. MerrillMerrillpersuadespersuades LynchLynch toto joinjoin himhim and,and, onon 1919 May,May, theythey openopen theirtheir officeoffice atat 77 WallWallStreetStreet..

19301930:: thethe decadedecade markedmarked thethe transfertransfer toto EE..AA.. PiercePierce && CoCo.. ofof thethe retailretailbrokeragebrokerage businessbusiness ofof Merrill,Merrill, LynchLynch && CoCo.. EE..AA.. PiercePierce reignedreigned asas aa leaderleaderofof WallWall Street,Street, thethe voicevoice ofof progressiveprogressive moderation,moderation, backingbacking manymany NewNewDealDeal reformsreforms andand acquiringacquiring manymany companies,companies, includingincluding CassattCassatt && CoCo..19401940:: MerrillMerrill LynchLynch reacquiresreacquires itsits retailretail brokeragebrokerage businessbusiness byby mergingmerging withwithEE.. AA.. PiercePierce && Cassatt,Cassatt, andand revertsreverts toto aa partnershippartnership..19411941:: Merrill Lynch, E. A. Pierce & Cassatt publish an annual report for the

fiscal year 1940. The firm is the first on Wall Street to publish such a report.Merrill Lynch, E. A. Pierce & Cassatt merge with Fenner & Beane, asecurities firm originally based in New Orleans. Merrill Lynch, Pierce,Fenner & Beane becomes the world's largest securities house, with officesin 93 cities and memberships in 28 exchanges.


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HistoryHistory19561956:: MerrillMerrill LynchLynch isis selectedselected asas oneone ofof sevenseven managersmanagers toto bringbring FordFord MotorMotorCompanyCompany publicpublic.. TheThe $$600600 millionmillion offeringoffering setssets aa recordrecord thatthat lastslasts forfor ninenine yearsyearsandand givesgives thethe firmfirm itsits firstfirst billionbillion--dollardollar underwritingunderwriting yearyear..CharlesCharles EE.. MerrillMerrill passespasses awayaway onon 66 OctoberOctober atat thethe ageage ofof 7070..19601960:: ContinuingContinuing thethe trendtrend ofof globalglobal expansionexpansion thatthat beganbegan inin thethe 19501950's,'s, MerrillMerrillLynchLynch opensopens itsits firstfirst officeoffice inin LondonLondon..19611961:: InIn pursuitpursuit ofof newnew marketsmarkets andand clients,clients, MerrillMerrill LynchLynch establishesestablishes aa presencepresenceinin JapanJapan andand opensopens anan officeoffice inin TokyoTokyo threethree yearsyears laterlater..19711971:: AfterAfter yearsyears ofof planning,planning, MerrillMerrill LynchLynch goesgoes public,public, thethe secondsecond BigBig BoardBoard

membermember toto dodo so,so, butbut thethe firstfirst toto havehave itsits sharesshares listedlisted onon thethe exchangeexchange..19961996--19981998:: MerrillMerrill LynchLynch expandsexpands itsits worldwideworldwide presencepresence throughthrough aa seriesseries ofofacquisitionsacquisitions andand officeoffice openingsopenings::

McIntoshMcIntosh andand CentaurusCentaurus inin AustraliaAustralia PhatraPhatra ThanakitThanakit SecuritiesSecurities inin ThailandThailand FCFC InversionesInversiones BursatilesBursatiles inin SpainSpain MidlandMidland WalwynWalwyn inin CanadaCanada

3333 newnew branchbranch officesoffices inin JapanJapan19971997:: MerrillMerrill LynchLynch acquiresacquires MercuryMercury AssetAsset Management,Management, anan internationalinternational assetassetmanagementmanagement groupgroup basedbased inin thethe UnitedUnited KingdomKingdom.. TheThe acquisitionacquisition addsadds toto thethefirm'sfirm's worldwideworldwide andand institutionalinstitutional investmentinvestment managementmanagement expertiseexpertise..MerrillMerrill LynchLynch becomesbecomes thethe firstfirst financialfinancial servicesservices companycompany toto surpasssurpass $$11 trilliontrillion ininclientclient assetsassets underunder managementmanagement


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Nina WolfNina Wolf 88

Financial HighlightsFinancial Highlights


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CompetitorsCompetitors

Some Investment Banking companiesSome Investment Banking companies

Morgan StanleyMorgan Stanley

Goldman SachsGoldman SachsCitigroup Global Markets Holdings IncCitigroup Global Markets Holdings Inc

Lehman BrothersLehman Brothers

UBS Investment BankUBS Investment Bank

Credit Suisse First Boston CorporationCredit Suisse First Boston Corporation

NOMURA HoldingsNOMURA Holdings


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Direct Competitor ComparisonDirect Competitor Comparison

Merill LynchMerill Lynch Citigroup IncCitigroup Inc Goldman SachsGoldman Sachs Morgan StanleyMorgan Stanley IndustryIndustry

Employees:Employees: 50,90050,900 253,000253,000 19,47619,476 51,19651,196 436436

Rev. Growth (ttm):Rev. Growth (ttm): --27.10%27.10% --16.90%16.90% 3.40%3.40% 0.00%0.00%

Revenue (ttm):Revenue (ttm): 26.70B26.70B 57.05B57.05B 23.62B23.62B 34.93B34.93B 145.79M145.79M

Gross Margin (ttm):Gross Margin (ttm): 31.04%31.04% 32.98%32.98% 24.93%24.93% 63.13%63.13%

EBITDA (ttm):EBITDA (ttm): 5.33B5.33B 5.14B5.14B 5.77B5.77B 29.80M29.80M

Oper. Margins (ttm):Oper. Margins (ttm): 17.20%17.20% 18.82%18.82% 16.51%16.51% 20.76%20.76%

Net Income (ttm):Net Income (ttm): 3.96B3.96B 17.78B17.78B 3.00B3.00B 3.79B3.79B 14.68M14.68M


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Yvonne HildebrandYvonne Hildebrand 1111

Case SummaryCase Summary

CaseCase isis aboutabout globalglobal ITIT consolidationconsolidation

MerrillMerrill LynchLynch && CoCo..

ReplacingReplacing itsits orderorder processingprocessing softwaresoftware aroundaround thethe

worldworld toto eliminateeliminate aa hodgepodgehodgepodge ofof inin--househouse andandacquiredacquired systemssystems

AnticipatedAnticipated resultsresultsCostCost reductionsreductions

AdditionalAdditional salessales

MergerMerger ofof thethe technologytechnology andand globalglobal serviceserviceunitsunits


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Q1.:Q1.: Why has there been aWhy has there been a

trend toward centralizingtrend toward centralizingsystems among financialsystems among financial

service firms? What are theservice firms? What are thebenefits and limitations of thisbenefits and limitations of this

trend?trend?


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Trend toward centralizationTrend toward centralization

Benefits:Benefits:ImportanceImportance forfor financialfinancial companiescompanies toto workwork ininrealreal--timetime.. CommunicationCommunication acrossacross boardersboarders ininrealreal--timetime hashas becomebecome aa realreal industryindustry driverdriver ininorderorder toto offeroffer betterbetter servicesservices toto theirtheir customerscustomersandand toto reducereduce costscosts inin thethe longlong--runrun..TheThe trendtrend forcesforces thethe companiescompanies toto havehave aacompetitivecompetitive costcost structurestructure andand aa worldworld--classclass

customercustomer serviceservice..CompaniesCompanies trytry toto getget commoncommon stems,stems, commoncommonplatformsplatforms andand commoncommon interfacesinterfaces..


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Elizabeth CatesElizabeth Cates 1414

Trend toward centralizationTrend toward centralization

Limitations:Limitations:

HighHigh InvestmentsInvestments

ExperienceExperience necessarynecessary toto implementimplement aa newnewsystemsystem

ProductivityProductivity isis lowerlower inin timestimes ofof

implementationimplementation thanthan inin otherother timestimes


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Elizabeth CatesElizabeth Cates

Q2.:Q2.: What are the businessWhat are the business

benefits of Merrill Lynchs newbenefits of Merrill Lynchs newglobal order processingglobal order processing

system? What global challengessystem? What global challengesare involved?are involved?


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BenefitsBenefits

TheThe newnew globalglobal orderingordering systemsystem isis efficientefficientinin thethe wayway ofof breakingbreaking downdown globalglobal andandgeographicgeographic barriersbarriers becausebecause itit cancanexecuteexecute ordersorders onon aa regionalregional basisbasis ratherratherthanthan thethe oldold systemsystem thatthat waswas constrainedconstrainedtoto locallocal connectionsconnections


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Benefits contBenefits cont

ItIt allowsallows thethe staffstaff andand customerscustomers ofof MerrillMerrillLynchLynch toto communicatecommunicate inin realreal timetime asasopposedopposed toto thethe oldold systemsystem

ItIt allowsallows MerrillMerrill LynchLynch toto offeroffer worldworld classclasscustomercustomer serviceservice


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ChallengesChallenges

AccordingAccording toto LynchsLynchs CFOCFO thisthis projectproject costcostsomewheresomewhere aroundaround tenstens ofof millionsmillions ofofdollarsdollars

ForFor somesome companiescompanies thisthis couldcould bebeforeseenforeseen asas aa challengechallenge

ImplementationImplementation asas for for asas employeeemployeetrainingtraining couldcould bebe aa challengechallenge


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Q3Q3.

Does the merger of Merrills.

Does the merger of Merrillsglobal service division and its ITglobal service division and its IT

division make good businessdivision make good businesssense? Why or why not?sense? Why or why not?


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BenefitsBenefits

ThereThere areare fourfour reasonsreasons whywhy thethe mergermerger ofofMerrillMerrill LynchsLynchs globalglobal servicesservices divisiondivisionandand itsits ITIT divisiondivision makesmakes aa goodgood businessbusinesssensesense::1.1. NeedNeed ofof competitivecompetitive costcost structurestructure

2.2. NeedNeed ofof worldworld--classclass customercustomer serviceservice

3.3. ExistenzExistenz inin aa heavilyheavily regulatedregulatedenvironmentenvironment onon aa globalglobal basisbasis

4.4. ImplementationImplementation ofof aa webweb serviceservice


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Questions?Questions?

Chpt_12.Presentation Merrill Lynch & Co

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Transcript of Chpt_12.Presentation Merrill Lynch & Co