Can Merrill keep Mercury in orbit?
The secrecy of the negotiations and the price paid stunned the City into awed silence. Merrill Lynch's takeover was certainly a good deal for Mercury Asset Management's shareholders. But was Merrill so taken with the brand name that it underestimated the fund manager's problems? Mercury has little room for growth at home and has never had much success expanding abroad. Mercury wants to keep some independence, but how long before it gets Merrillized? Antony Currie reports.
When Merrill Lynch bought Mercury Asset Management in November last year, it looked like a coup for the US bank, and excellent value for MAM's shareholders. Merrill paid £17 a share, 33% more than the market price, so valuing the UK fund manager at £3.1 billion ($5.2 billion).
Sure, it was a full price, as Merrill's chairman and chief operating officer, David Komansky, admitted at the time. But look at what it got them. Combined, the two firms' funds under management now amount to $450 billion, which catapults them into third spot worldwide behind Fidelity and the Axa group. Merrill gets the advantage of MAM's brand name - it has always been regarded as one of the top four fund managers in the UK, along with Schroders, Gartmore, and PDFM - as well as its knowledge of institutional asset management. This is an excellent combination with Merrill's retail mutual funds in the US, and with its formidable force of financial advisers: there are over 15,000 of them in the US.
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The fit seems perfect.