Presented to: Presented By:

Dr. Himanshu Mohan Karnica Ghildiyal

Kaushik Das Gupta

Sandeep Yadav

Case Study

MERRIL LYNCH in JAPAN

About CompanyMerrill Lynch is an investment banking business and

the world’s largest underwriter of debt and equity.Merrill Lynch, starting with the 1980s, expanded

internationally, with a dominant presence in London and Tokyo.

In the beginning, its international presence was limited to the investment banking side, but starting from 1990s it offered all its services. In 1995, Merrill Lynch purchased Smith New Court, the largest stock brokerage in Great Britain.

Later in 1997, it acquired the leading manager of mutual funds in United Kingdom, Mercury."

Merrill Lynch’s investment banking operations has had a long global reach and is looking to reside in Japan.  

History of Company The company was founded on January 6, 1914, when

Charles E. Merrill & Co. opened for business at 7 Wall Street in New York City

A few months later, Merrill's friend, Edmund C. Lynch, joined him, and in 1915 the name was officially changed to Merrill, Lynch & Co

In its early history, Merrill, Lynch & Co. made several successful investments

In 1921, the company purchased Pathé Exchange, which later became RKO Pictures.

Contd…In 1926, the firm made its most significant financial

investment at the time, purchasing a controlling interest in Safeway, transforming the small grocery store into the country's third largest grocery store chain by the early 1930s.

In 1940, the firm merged with E. A. Pierce & Co. and Cassatt & Co. and was briefly known as Merrill Lynch, E. A. Pierce, and Cassatt.

The company became the first on Wall Street to publish an annual fiscal report in 1941.

The firm went public in 1971 and became a multinational corporation with over US $1.8 trillion in client assets, operating in more than 40 countries around the world

Contd… In 1977, the company introduced its Cash Management

Account (CMA), which enabled customers to sweep all their cash into a money market mutual fund, and included check-writing capabilities and a credit card.

Fortune magazine called it "the most important financial innovation in years.

On November 1, 2007, Merrill Lynch CEO Stanley O'Neal left the company, after being criticized for the way he handled the firm's risk management and the subprime mortgage crisis, which resulted in about US $2.24 billion in unexpected losses.

On January 17, 2008, Merrill Lynch reported a $9.83 billion fourth quarter loss incorporating a $16.7 billion write down of assets associated with subprime mortgages.

Contd…On April 17, 2008, Merrill Lynch reported a net loss of $1.97

billion for the first quarter of 2008. Merrill responded to its losses by raising capital through the sale of preferred shares.

On January 22, 2009 Merrill Lynch was acquirede by Bank of America and became

About BOA. ML is one of the world’s largest financial

institutions serving individual consumers, small and middle market business and large corporations with full range of banking, investing asset management and other financial and risk management products and services.

Co . Provides unmatched convenience in the united states serving more than 59 million consumers and small business relationships with more than 6,100 retail banking offices, more than 18,000 ATM’s and award wining online banking with more than 25 million active users.

Co serves client in more than 150 countries and had relationship with 99% of U.S. Fortune 500 co. and 83% of Fortune Global 500.

After the AcquisitionIt becomes the largest brokerage in the world, with

more than 15,000 financial Advisors and approximately $2.2 trillion in Client Asset.

A global leader in wealth management, private banking and retail brokerage.

Bank of America owns approximately 34% of the economic interest in Black Rock, an independent publicly traded investment management firm.

Introduction of Case StudyThis case study analyzes the risks and benefits for a company to go international, using Merrill Lynch as an example. Using the time frame from the 1980s to 2002, the paper examines what kind of market would be suitable for such a strategy and how macroeconomic events can influence a business. The author provides a background study on Merrill Lynch and discusses the rate of change in the international capital market, paying attention to how Merrill Lynch took advantage of this. The case study speaks of the Japanese market in particular, and it's suitability for Merrill Lynch, studying the risks and benefits of their strategy. In closing, the case study analyzes Merrill Lynch's future in Japan.

Facts of CaseIn 1980 started a private client business in Japan

but met with limited success because of

restrictive regulations.

In 1998 there are some relaxation on the

regulations.

Joint Venture with Sanwa Bank.

Bankruptcy Yamaichi Securities.

Questions

Question 1.

Given the changes that have occurred in the international capital markets during the past

decade, does Merrill Lynch's strategy of expanding internationally make sense? Why?

Question 2.

What factors make Japan a suitable market for Merrill Lynch to enter?

Question 3.

Review Merrill Lynch's 1997 reentry into the Japanese private client market. Pay close attention to the timing and scale of entry and the nature of the strategic commitments Merrill Lynch is making in Japan. What are the potential benefits associated with this strategy? What are the costs and risks? Do you think the tradeoff between benefits and risks and costs makes sense? Why?

Question 4.

The collapse in stock market values in 200102 resulted in Merrill Lynch's Japanese unit incurring significant losses. In retrospect, was the Japanese expansion a costly blunder or did the company simply get hit by macroeconomic events that were difficult to predict and avoid?

Question 5.

Do you think Merrill Lynch should continue in Japan? Why?