Merrill Lynch

1
Merrill Lynch Co. The Business Case for Global
IT Consolidation

• Group 5 Case 4

2
Team Members

• Nina Wolf
• Jessi Janis
• Elizabeth Cates
• Eric Young
• Yvonne Hildebrand

3
Stan ONeal chairman chief executive and
president member Operating Committee.

• Mr. ONeal became chief executive officer in
  December 2002 and chairman of the board in April
  2003. He has been a member of the board since
  July 2001 when he was named president and chief
  operating officer.
• He joined Merrill Lynch in 1986 as a director in
  Investment Banking

4
About Merrill Lynch

• One of the worlds leading financial management
  and advisory companies with offices in 35
  countries and private client assets of
  approximately 1.1 trillion.
• As an investment bank it is a leading global
  underwriter of debt and equity securities and
  strategic advisor to corporations governments
  institutions and individuals worldwide.
• Through Merrill Lynch Investment Managers the
  company is one of the worlds largest managers of
  financial assets.

5
Products and Services

• Merrill Lynch Co. Inc. is a Delaware
  corporation that through its subsidiaries and
  affiliates provides capital markets services
  investment banking and advisory services wealth
  management asset management insurance banking
  and related products and services on a global
  basis.
• Merrill Lynch offers these products and services
  to individual investors businesses of all sizes
  governments and governmental agencies as well as
  financial institutions. Merrill Lynch is
  organized into three interrelated businesses
• Global Markets and Investment Banking Group
  (GMI)
• Global Private Client Group (GPC)
• Merrill Lynch Investment Managers (MLIM)

6
History

• 1907 Charles E. Merrill arrived in New York
  filled with dreams determined to make a name for
  himself. He met Edmund C. Lynch and a great
  partnership began.
• 1914 On 6 January Charles E Merrill Co. opens
  its doors. Merrill persuades Lynch to join him
  and on 19 May they open their office at 7 Wall
  Street.
• 1930 the decade marked the transfer to E.A.
  Pierce Co. of the retail brokerage business of
  Merrill Lynch Co. E.A. Pierce reigned as a
  leader of Wall Street the voice of progressive
  moderation backing many New Deal reforms and
  acquiring many companies including Cassatt Co.
  
• 1940 Merrill Lynch reacquires its retail
  brokerage business by merging with E. A. Pierce
  Cassatt and reverts to a partnership.
• 1941 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 a
  securities firm originally based in New Orleans.
  Merrill Lynch Pierce Fenner Beane becomes the
  worlds largest securities house with offices in
  93 cities and memberships in 28 exchanges.

7
History

• 1956 Merrill Lynch is selected as one of seven
  managers to bring Ford Motor Company public. The
  600 million offering sets a record that lasts
  for nine years and gives the firm its first
  billion-dollar underwriting year.Charles E.
  Merrill passes away on 6 October at the age of
  70.
• 1960 Continuing the trend of global expansion
  that began in the 1950s Merrill Lynch opens its
  first office in London.
• 1961 In pursuit of new markets and clients
  Merrill Lynch establishes a presence in Japan and
  opens an office in Tokyo three years later.
• 1971 After years of planning Merrill Lynch goes
  public the second Big Board member to do so but
  the first to have its shares listed on the
  exchange.
• 1996-1998 Merrill Lynch expands its worldwide
  presence through a series of acquisitions and
  office openings
• McIntosh and Centaurus in Australia
• Phatra Thanakit Securities in Thailand
• FC Inversiones Bursatiles in Spain
• Midland Walwyn in Canada
• 33 new branch offices in Japan
• 1997 Merrill Lynch acquires Mercury Asset
  Management an international asset management
  group based in the United Kingdom. The
  acquisition adds to the firms worldwide and
  institutional investment management expertise.  
  Merrill Lynch becomes the first financial
  services company to surpass 1 trillion in client
  assets under management

8
Financial Highlights
9
Competitors

• Some Investment Banking companies
• Morgan Stanley
• Goldman Sachs
• Citigroup Global Markets Holdings Inc
• Lehman Brothers
• UBS Investment Bank
• Credit Suisse First Boston Corporation
• NOMURA Holdings

10
Direct Competitor Comparison
11
Case Summary

• Case is about global IT consolidation
• Merrill Lynch Co.
• Replacing its order processing software around
  the world to eliminate a hodgepodge of in-house
  and acquired systems
• Anticipated results
• Cost reductions
• Additional sales
• Merger of the technology and global service units

12
Q1. Why has there been a trend toward
centralizing systems among financial service
firms What are the benefits and limitations of
this trend
13
Trend toward centralization

• Benefits
• Importance for financial companies to work in
  real-time. Communication across boarders in
  real-time has become a real industry driver in
  order to offer better services to their customers
  and to reduce costs in the long-run.
• The trend forces the companies to have a
  competitive cost structure and a world-class
  customer service.
• Companies try to get common stems common
  platforms and common interfaces.

14
Trend toward centralization

• Limitations
• High Investments
• Experience necessary to implement a new system
• Productivity is lower in times of implementation
  than in other times

15
Q2. What are the business benefits of Merrill
Lynchs new global order processing system What
global challenges are involved
16
Benefits

• The new global ordering system is efficient in
  the way of breaking down global and geographic
  barriers because it can execute orders on a
  regional basis rather than the old system that
  was constrained to local connections

17
Benefits cont

• It allows the staff and customers of Merrill
  Lynch to communicate in real time as opposed to
  the old system
• It allows Merrill Lynch to offer world class
  customer service

18
Challenges

• According to Lynchs CFO this project cost
  somewhere around tens of millions of dollars
• For some companies this could be foreseen as a
  challenge
• Implementation as for as employee training could
  be a challenge

19
Q3. Does the merger of Merrills global service
division and its IT division make good business
sense Why or why not
20
Benefits

• There are four reasons why the merger of Merrill
  Lynchs global services division and its IT
  division makes a good business sense
• Need of competitive cost structure
• Need of world-class customer service
• Existenz in a heavily regulated environment on
  a global basis
• Implementation of a web service

21
Questions