060Merrill Feature F 3.7.06 13.06 Page 60 Cover story How Stan … · 2018-12-21 · see unfounded...

60 EUROMONEY · July 2006 www.euromoney.com

Cover story

How Stan O’Neal

Merrill Lynchtransformed

060Merrill Feature F 3.7.06 13.06 Page 60

IF YOU’RE LOOKING for a sure sign of the rejuvenation ofMerrill Lynch under the leadership of Stan O’Neal, look nofurther than the events of May this year.

Speculation had been rife that Merrill was about to maketransformational deals in some or all of retail banking, mort-gage origination and consumer finance.

Merrill’s share price was suffering as a result. O’Neal neededto calm expectations and make plain the reality. Having spentfive years restructuring Merrill Lynch – first through some ofthe most swingeing cost-cutting the industry has ever seen,then through a transformation of the business throughorganic growth and selective acquisitions – he did not want tosee unfounded rumours unsettle the steady course he had set.

A few meetings with key shareholders and analysts later andthe market calmed down.

But it’s the success of the Merrill transformation story, andthe pace at which the bank’s results have improved in the pasttwo years as the benefits of the restructuring kick in, that havegot the markets excited about Merrill again.

At the very least, such speculation might nail once and forall the patently undeserved reputation heaped on O’Nealduring his early years at the Merrill helm – that he was merelya cost-cutter, and not the man to take Merrill forward.

Much of the credit for the turnround has to go to O’Nealhimself, who became president of the firm in its darkest daysin 2001.

O’Neal, in person, insists on sharing much of the creditwith his tightly knit executive committee, which numbersjust eight people.

But here’s the take of a very senior member of Merrill’smanagement group: “When Stan O’Neal took over the firm, hewas the only person for the job. Without him, Merrill’s busi-nesses would have survived – only we’d be owned by someoneelse now.”

The numbers don’t lie, and here’s some headline evidence ofthe O’Neal effect. Revenues in the first quarter of 2006 totalled$7.96 billion – a 28% increase that outstripped most of itsrivals., higher than even in the halcyon days of 2000 when theS&P 500 hit its peak and Merrill was almost a pure equities firm.Revenues in global markets and investment banking (GMI) were$4.55 billion, up 37% from the previous year. In the first quarterof 2003, GMI revenues were little more than $2.5 billion. Debtrevenues soared to $2.1 billion in Q1 2006 alone.

Merrill’s mistakes of the pastThe Merrill Lynch of 2006 is a very different investment bankto its former incarnation, the legacy of a previous regime thathad allowed the firm’s excesses to spiral out of control.

By 2000 and the height of the tech bubble, Merrill Lynchhad gone from being a profitable diversified investment bankto pretty much a one-trick pony. It was out of the commoditiesbusiness, out of private equity, losing money in fixed income,little or nowhere in mortgages and stop/start in foreignexchange. People familiar with management strategy at thetime say there was a disproportionate reaction to bad news; asall the good news was in equities, resources were allocatedaccordingly. At the turn of the millennium about 75% ofMerrill’s bottom line came from equity-related business.

“Success is often the route of hubris and maybe indulgence;in many respects it’s loss of discipline on many fronts,” saysO’Neal. “Because we’d been so successful doing a number ofthings, we came to believe that if we just did more things inmore places, that we would continue to be equally successfulwithout necessarily thinking about what was required in orderto make it a reality, or adequately testing the assumptions thatunderlie the business thesis.”

In effect, the thundering herd was clapped out.Merrill Lynch’s senior managers pinpointed a number of

areas that needed to undergo fundamental change. The firstwas operating discipline.

“The facts and figures didn’t lie,” says vice-chairman andchief administrative officer Ahmass Fakahany. “We were, insome cases, feeding businesses with low margins and lowerprospects. We had too many specialists. We had too manysupport people and needed to employ a new discipline aroundresource allocation. The firm didn’t need three legs. We neededto chop one off.”

And that’s exactly what Merrill did, removing 33% of itsworkforce in a dramatic cull of 25,000 employees.

And it wasn’t just a question of cutting staff numbers.Mother Merrill had become over-generous to her brood: thedays of chauffeured cars for middle managers, conciergeservices for investment bankers and lavish expenses had togo too.

In total, some $7.5 billion of annual costs were removedfrom the business.

In addition, O’Neal had to take complete control of the busi-

www.euromoney.com July 2006 · EUROMONEY 61

When Stan O’Neal took over as president and CEO of Merrill Lynch in2001, the thundering herd of the 1990s was clapped out. O’Neal imposeda ruthless cost-cutting strategy that saved the firm’s independence. Nowhis rebuilding plans are starting to bear fruit. Can Merrill heed the lessonsof the past, but at the same time make it back to the pinnacle ofinvestment banking? Clive Horwood reports



Cover story

ness. Look at his title – chairman, chief executive officer, andpresident. Not much doubt who is in charge then, is there?

But that wasn’t always the case. For a long-time O’Neal wasseen a stop-gap, as a cost-cutter who would go once the cullwas over. People had focused too much on his two years asCFO. They’d forgotten about his years as a ruthless and aggres-sive dealmaker – the real O’Neal to this day.

Meet O’Neal and you can’t help but be impressed with hispoliteness and easy charm, and his determination not to dealin glib soundbites but to give a full and considered response.He masks his cutting edge well.

But a kid who was born on a cotton farm doesn’t become the11th CEO of one of Wall Street’s finest without an edge. In2003 the challenge to his authority duly came. Vice-chairmanTom Patrick and Arshad Zakaria, president of investment bank-ing, were ousted by O’Neal when they attempted to underminehis authority by going behind his back to try to get Zakariaappointed as president of the firm.

O’Neal won’t tolerate dissent – the company line has beenagreed by its senior management, and it will be adhered to.

“No one would mistake me for being ambiguous about whatI think is the right form of behaviour and the right operatingmode and objectives,” he says. “And so I’ve tried to be veryclear as we’ve gone through this evolution about what’sexpected from our senior leaders. We have made some changesover time, where we’ve had people who just didn’t get it, whocouldn’t understand that this was about the enterprise morethan it was about them, and it was more about excellence inindividual performance as part of team, as opposed to simplydistinguishing yourself.”

O’Neal also had to put up with the comments of WinthropSmith Jr, the scion of a company founder and former seniorexecutive, who said in November 2003: “I am not sure [Stan]has heard or yet fully appreciates the Merrill Lynch stories andmay not be able to embrace the culture in the same fashion ashis predecessors. Time will tell.”

To prove the likes of Smith wrong, O’Neal simply got onwith the job. Once the cost-cutting was complete, and O’Nealhas assumed complete control in 2003, the rebuilding ofMerrill Lynch could begin in earnest. The new, leaner Merrillhad some money to spend on growth.

But it was a steady-as-she-goes approach – O’Neal was deter-mined not to repeat the mistakes of the past. Selected invest-ment in organic growth was the starting point. Merrill hadfallen behind its peers in derivatives and trading. From 2003 to2005, Merrill made 500 hires at managing director or directorlevel – people Fakahany says would not have considered join-ing the firm two years earlier.

A business close to O’Neal’s heartLeveraged finance is an asset class that encapsulates thewhole Merrill turnaround story. In the early 1990s, whenO’Neal was in charge of the business, no other firm couldtouch Merrill’s leveraged finance franchise. From 1996, thefranchise fell victim to Merrill’s obsession with equitymarkets. As one insider says: “We simply gave the businessaway.” By 2003, Merrill had sunk to a lowly 12th place in theglobal league table.

There was a lot of internal discussion about what to do next.

GLOBAL ECM BOOKRUNNER RANKING – JUN 1 '05 TO MAY 31 '06Pos. Bookrunner Deal value ($m) No. % share1 Goldman Sachs 75,948 209 10.4

2 Citigroup 61,142 308 8.4

3 Morgan Stanley 58,459 205 8.0

4 UBS 53,420 285 7.3

5 JPMorgan 42,823 249 5.96 Merrill Lynch 42,240 247 5.87 Deutsche Bank 40,372 205 5.6

8 Credit Suisse 39,292 192 5.4

9 Lehman Brothers 28,903 155 4.0

10 Nomura 19,410 152 2.7

Source: Dealogic

GLOBAL INTERNATIONAL BOND BOOKRUNNER RANKING – JUN 1 '05 TO MAY 31 '06Pos. Bookrunner Deal value ($m) No. % share1 Deutsche Bank 201,674 843 7.9

2 Barclays Capital 187,907 771 7.4

3 Citigroup 168,890 440 6.6

4 JPMorgan 162,318 455 6.4

5 Morgan Stanley 137,873 481 5.46 Merrill Lynch 126,908 500 5.07 UBS 122,591 429 4.8

8 HSBC 121,314 341 4.8

9 BNP Paribas 115,152 388 4.5

10 Credit Suisse 111,952 380 4.4

Source: Dealogic

GLOBAL ANNOUNCED M&A ADVISORY RANKING – JUN 1 '05 TO MAY 31 '06Pos. All adviser parent Deal value ($m) No. % share1 Goldman Sachs 1,120,314 366 32.5

2 JPMorgan 887,882 425 25.8

3 Citigroup 801,813 318 23.3

4 Morgan Stanley 799,503 344 23.2

5 Merrill Lynch 794,214 296 23.0


7 UBS 637,101 360 18.5

8 Deutsche Bank 536,409 252 15.6

9 BNP Paribas 408,664 124 11.9

10 Credit Suisse 400,431 273 11.6

Source: Dealogic

EUROPEAN ANNOUNCED M&A ADVISORY RANKING – JUN 1 '05 TO MAY 31 '06Pos. All adviser parent Deal value ($m) No. % share1 Goldman Sachs 561,206 150 32.8

2 JPMorgan 546,119 200 31.9

3 Merrill Lynch 514,214 123 30.1

4 Citigroup 461,482 149 27.0

5 UBS 456,885 185 26.7

6 Deutsche Bank 451,019 161 26.4

7 Morgan Stanley 442,991 166 25.9

8 BNP Paribas 402,469 104 23.5


10 Rothschild 300,326 252 17.6

Source: Dealogic

060Merrill Feature F 4/7/06 08:56 Page 62


STRENGTH COMES from the top. And it is from the tight-knit senior executive group that Stan O’Neal believes Merrillderives much of its strength.

“We’ve never had such an outstanding group of leadersacross our product silos in the history of the firm,” saysO’Neal. “And today we have a common commitment amongall the senior people to that purpose. And it’s not just myvision, it’s a vision that’s bought into and shared by theentire executive committee.”

Another member of the executive committee describes itthus: “We chose to be a really global firm. We are a young anddiverse team but we have all worked together for the best partof 15 years and are tight as a drum. As an executive commit-tee we talk as one.”

Ask O’Neal to describe deals that he isparticularly proud of and he will talkabout the way those individuals broughtdifferent attributes to the table that madethe deal a success; other CEOs are morelikely to discuss their own role in securinga prized mandate against the odds.

Take three of Merrill’s biggest institu-tional deals of the past two years. For itsprivate banking tie-up withMitsubishi/UFJ, the key point people onthe deal were Bob McCann, the vice-chairman who runs the global wealthmanagement business, and Ahmass Faka-hany, the vice-chairman and chiefadministrative officer, who spent six yearsof his early career in Japan. The at timesdifficult negotiations took well over 12months to come to fruition. (AskMcCann what he learned from the expe-rience, and he quips that he certainlylearned to swear pretty well in Japanese.)

For a deal as transformational as the tie-up between MLIMand Blackrock, O’Neal himself had to take a prominent role.But he was assisted throughout by GMI president Greg Flem-ing, who spent much of his early career working in the finan-cial institutions business, specifically in asset management,and knew Blackrock CEO Larry Fink as an investment bankclient as he had helped take the firm public in 1999.

Management ethosWhen Merrill bought Entergy-Koch Trading in 2004 for $800million, GMI president Dow Kim was heavily involved as thebusiness would fall under his remit in global markets and hewas the main driver of the plan to break into commodities.Also prominent was general counsel Rosemary Berkery, asthere existed complex regulatory issues that needed to bemitigated to make the management team confident thatMerrill could preserve and build value.

Now, as Merrill aims to build its business and attract newtalent, its senior management is trying to translate a similarethos across its business divisions.

Merrill’s attitude to attracting talent is summed up byFakahany as follows: “We want to create a strong pipelines ofbrainpower,” he says. “People must have a bond with thecompany that goes beyond compensation. We have created aperformance-based culture. And by return we will provideleadership development and show them a progression and apath, matching specific talents and skills with opportunity.”

Merrill tries to create an entrepreneurial environment.Take European M&A. Over the past year or so Merrill hashired 55 people into this division. The aim has been to targetjunior managing directors – people who have been in theindustry for a number of years but have not been at the fore-front of wealth creation – and giving them the opportunity

to have their own business to run for the first time. It’s a culture designed to make managers take smart busi-

ness decisions. “If a manager comes to me and says he needs$2 million to break into a new client, he has to make sure hecan generate $10 million in revenues if he’s going to hit histargets,” says one senior Merrill banker.

The entrepreneurial spirit appears to have permeatedthrough the bank. It’s one of the biggest shifts from the past.Here’s the take of one Merrill veteran who has been throughthe firm’s boom, bust and boom again: “The big differencewith this firm compared with 10 years ago is that it is muchmore of a meritocracy. It took a long time to bring in thatmentality and it had to come from the very top, from Stanhimself. Now everyone gets paid on performance. It doesn’tmatter if you’ve been here for five minutes or 50 years – if youbring in revenue, you get paid. Every bankers’ P&L is verytransparent. It makes this a great place to work.”

“We want to create astrong bench andpipelines of brain-power. People musthave a bond with the company that goes beyondcompensation. Wehave created aperformance-basedculture” Ahmass Fakahany

The O’Neal era Merrill ethic



Cover story

Insiders admit that not everyone was keen to reinvest in thebusiness. “We’d blown the business. Why would we stake ourcredibility and reputation on saying we were going to rebuildit?” says one senior executive. “Stan was determined to do it.But some people thought he was out of his mind.”

The winning factor was the need to be close to financialsponsors – who one Merrill banker describes as “arguably ourmost important clients today” – and to achieve that the firmhad to have a high-yield franchise.

Once the discussions were over the turnaround came. And ithas been quick and impressive. Merrill now ranks as one of theworld’s top five leveraged finance firms again, and is onlybeaten by banks with large balance sheets as well as investmentbanking, such as JPMorgan.

It’s strange to hear Merrill executives talk once again aboutleague tables. For a while, the subject was strictly off limits.

Merrill was the bank that, in the 1990s, wanted to benumber one at everything. Insiders say that in 1997 and 1998,when Merrill set out its entire stall to be number one in theglobal bond underwriting league tables, the fixed-incomebusiness lost $1 billion. It was the wrong strategy, as O’Nealnow admits.

“There was a time when this firm mistakenly defined beingnumber one in a league table as being equivalent to the qual-ity of the franchise. But it’s far more complex than that,”O’Neal says.

As Merrill was rebuilding, and because an obsession withleague tables was so closely associated with past failings, itwas hard to pin down Merrill’s managers about aims of

ranking or market share. Now a once-more confident Merrill will discuss the dreaded

l-word. But there’s a difference: the detail of the discussion haschanged.

Greg Fleming, president of global markets and investmentbanking, says: “League tables do matter. They are critical to clientrelevance, and they add to a client’s perception of our capabilitiesin a certain area. Being 12th or 15th doesn’t work. Whether youpush to number one depends on each market’s dynamics. Inhigh yield, for example, an incremental move in league tablesmay not be justified from a risk/return standpoint.”

Back to private equityO’Neal feels his firm mistakenly abandoned private equity inthe 1990s. Now it is back in the business with a bang, invest-ing alongside clients in deals where the firm considers itappropriate.

O’Neal doesn’t feel there is a potential for conflict of interest:“We’ve not been a sell-side adviser and a bidder at the sametime, and we don’t plan to be, and I think that is the source ofthe debate,” he says pointedly. Rather it would be bad news forMerrill and its shareholders if the firm were not involved,according to the man who the private equity business ulti-mately reports to, Greg Fleming.

Fleming uses Bank of China as a good example of howMerrill looks at private equity. Other notable investmentsinclude Debenhams and Hertz. “We’d been involved withRoyal Bank of Scotland on many of their transactions over anumber of years,” he says. “They wanted other outsideinvestors on the Bank of China trade, and we were able tocommit our own capital as well as bring in other investors.”

Fleming says that in private equity Merrill will maintainthe cautious approach that it adopted when it entered othernew markets.

“We aren’t going to chase deals simply to try to achieve adiversified private equity portfolio quickly – that’s a recipe formaking mistakes,” he says. “This business has been in a cyclicalhigh for a couple of years but we’re here for the longer term,building a business for the next 15 or 20 years, not simplyracing after deals in a hot market.”

“We looked very closely at the build orbuy argument in commodities. We

had to be honest – why would peopleat Goldman or Morgan Stanley join us

when we didn’t have a business tospeak of. In the end, with EKT, we hit

a home run”Dow Kim

HOW MERRILL TURNED ITS PERFORMANCE AROUND2001 2005

Net revenues ($mln) 21,548 26,009

Net earnings ($mln) –340 5116

Diluted earnings per share ($) –0.45 5.16

Cost/revenue ratio 59.5% 47.8%

Pre-tax profit margin – 27.8%

Return on average common – 16.0%stockholders’ equity

Source: Merrill Lynch



Being everything to the clientM&A has been an area of particular achievement for Merrill inthe past two years. Over the past 12 months it has scored note-worthy mandates in many of the largest deals: for exampleadvising UK telco 02 on its sale to Spain’s Telefónica for $31.7billion; advising UniCredito Italiano on its $22 billion acquisi-tion of Germany’s HVB, just 12 months after it had played aleading role in advising Santander on the first major Europeancross-border merger, with the UK’s Abbey; advising Procter &Gamble on its $60.8 billion takeover of Gillette; and also UFJ,when it was sold to Mitsubishi Financial in Japan for$59.1 billion.

For Fleming, the success of the M&A business – and inparticular the frequency with which Merrill has been winningmandates on the defence side of bids – is a good sign of thestrength of the entire firm. “Winning defence mandates is abarometer of the health of our client relationships,” he says.“We don’t just want to be an M&A boutique – we want toprovide our clients with every service they need.”

Merrill managers point to a series of mandates for Houston-based energy company Targa Resources as an example of whathas become the holy grail in investment banking: get the M&Amandate and then all the financing (and fees) that go with it.

In October last year Targa, which is affiliated with privateequity firm Warburg Pincus, paid $2.45 billion for the naturalgas gathering, processing and distribution assets of Dynegy.

Merrill was the sole M&A adviser to Targa; it providedcommitment for the $2.75 billion debt financing; it was jointlead arranger and joint bookrunner on a $2.5 billion seniorsecured credit facility; it was joint bookrunner on an issue of$250 million in senior notes; its commodities divisionprovided energy commodity hedges; and Merrill Lynch GlobalPrivate Equity invested in the deal. There, in one transaction,is the encapsulation of what modern investment banking hasbecome all about.

A home run in commodities?As well as concentrating on organic growth, Merrill has made anumber of acquisitions over the past three years. Notable dealsinclude buying UK mortgage servicer Mortgages plc, and theacquisition of a 90% stake in Indian investment bank DSP.

But the transaction that gets everyone at Merrill mostexcited is the acquisition of Entergy-Koch Trading in 2004 in adeal though to be worth about $800 million. Merrill had neverbeen a serious player in the commodities markets. It had beenlooking to break into the market for some time, and consideredbidding for Enron’s old trading business, which eventually wasbought by UBS.

EKT was the ideal fit, however; it enabled Merrill to have alarge-scale commodities trading business from which it couldthen roll out investment banking products to clients.

EKT would not come cheap. In the final quarter of 2004 thecommodities boom had built up the head of steam it stillshows no sign of losing. Other banks, such as Citigroup,Lehman Brothers and JPMorgan, were also keen on EKT.Merrill had to pay top dollar. But speak to people behind thedeal and they’ll now say they got a bargain.

“We looked very closely at the build or buy argument,” saysDow Kim, president of global markets and investment bankingin charge of secondary business (his co-head Fleming runsorigination). “We had to be honest – why would people atGoldman or Morgan Stanley join us when we didn’t have abusiness to speak of.”

Home runKim says Merrill hit a home run with EKT. Merrill would havemissed out on the commodity hedging on the Targa trade ifthe firm had not bought EKT. Now they are aggressively build-ing an oil operation within EKT, hiring 65 people and openingoffices in Singapore and Japan – to complement EKT’s tradi-tional expertise in natural gas.

O’Neal is suitably bullish about his acquisition: “We enteredthat transaction with a high degree of certainty that it wouldbe at least a huge positive, and it’s turned out to be even betterthan we could have expected. It’s not only that it was goodfrom a pure financial return point of view, it’s been fundamen-tally important to our ability to continue to serve our clients.”

One legacy of Merrill’s pre-2001 days was that it continued tohave one of the best cash equity businesses on the street. But ithas little presence in businesses such as electronic trading, port-folio trading or statistical arbitrage. While competitors such asGoldman Sachs and Morgan Stanley had been investing in

“Winning defence mandates is abarometer of the health of ourclient relationships. We don’t justwant to be an M&A boutique – wewant to provide our clients withevery service they need” Greg Fleming

060Merrill Feature F 3.7.06 13.06 5


Cover story

these areas, Merrill had put all itsmoney in cash. It’s a business, saysFakahany, that might have taken yearsto build in terms of a team and its rela-tionship. Instead it hired in as head ofglobal equity Rohit d’Souza, and histeam, from Morgan Stanley.

Kim says the investment is startingto pay dividends. Equity market-relatedrevenues for the first quarter of 2006were up 62% on the same period lastyear. Merrill’s equity prop tradinggroup, which began about 18 monthsago, contributed a “nine-figurerevenue number” in the first sixmonths of 2006, according to oneMerrill banker.

Foreign exchange is another area thatMerrill needs to build up. The firmslipped in Euromoney’s latest benchmarksurvey (see May 2006, page 121) fromsixth place in overall trading to 10th. Interms of trading with non-financialcorporations, it plummeted from fifthplace to a lowly 23rd. Perhaps mostworrying of all, in the important lever-aged funds space Merrill dropped fromsecond to 10th place.

Rival FX bankers say Merrill hasslipped recently because of high-profile departures and a perceived lackof investment in technology for itsplatform.

Kim says that FX is an importantbusiness to build up. “We need toconcentrate especially onspot/forward in G10 currencies, localcurrency and exotic trading. We’readding resources in complex products and local currencies.And we want to leverage our retail franchise with FX struc-tured products.”

The aim is not to be one of the larger liquidity providers,such as a Citigroup or Deutsche Bank, but rather to be suffi-ciently in the flows to allow Merrill to take part in higher-margin business; and also to make sure it doesn’t miss out onM&A-related FX hedging opportunities for clients.

Prime brokerage is another hole that O’Neal and his teamwere determined to fill. For Merrill’s management, the ques-tion about building a prime brokerage business was notwhether it was wise to get into it so late, but rather whyhadn’t they been in it before?

O’Neal says: “Do we think we can be competitive and bringsomething distinctive, versus Bear Stearns, Morgan Stanley,Goldman Sachs? The answer is yes. Because we bring a cashequity business that is second to none, a high quality of serviceand a research capability and a client orientation that I think isdistinctive from all the other firms we compete with.”

Takeover speculationDespite the strong turnaround inMerrill’s business, and its improvingprofit and revenue numbers, the firm’sreturn on equity figures still languish, ataround 17%, several points behind itspeers, such as Goldman Sachs, LehmanBrothers and Morgan Stanley. This mightin part be an effect of its brokerage busi-ness. It’s certainly something that O’Nealand his CFO, Jeff Edwards, are looking torectify. In large part they have done thisby using free cashflow to buy backbillions of dollars of Merrill stock.Edwards admitted in his Q1 earnings call

with analysts that there was “some impa-tience among senior management” at thepoor ROE numbers.

It’s one of the main reasons for the hugeamount of speculation about whetherMerrill will seek a transformational acqui-sition. The stock markets got particularlyexcited about the prospect at the start ofthe second quarter of this year: dependingon who you listened to, Merrill was aboutto buy a retail bank in North Fork, a globalmortgage originator in Countrywide, or aconsumer finance business.

The one certain impact of the specula-tion was that it drove down Merrill’s shareprice. O’Neal went out on his analyst andinvestor charm offensive. Morgan Stanleyanalyst Chris Meyer put out a reportsaying “concerns about Merrill doing a‘dumb’ acquisition are misplaced”. Hewent further, saying that lumping all therumours together to say Merrill was underpressure to buy a bank “is inaccurate to

start with and doesn’t do Merrill justice given their track recordof doing ‘smart’ deals over the last three years”.

Meyer says that Merrill’s main problem in terms of improvingits ROE discount is not just an excess of capital but also becauseof low asset turnover. Pushing more assets through its securitiza-tion business would be one way of doing this – which is whyMerrill is keen to take on incumbents such as Lehman and BearStearns in the US and build a mortgage origination platform.

O’Neal has shown in the past that he won’t be rushed intoanything that he doesn’t think would be right for the bank.

“We’ve been doing this in a conservative way for about threeyears now, and I’d say we are 75% of the way towards what wewould ideally like to achieve,” says O’Neal. “The only reasonwe’re not 100% of the way there is because we either haven’tseen the acquisition opportunity, or we haven’t yet been ableto add the right people.”

The lessons of the past remain at the forefront of O’Neal’smind. He won’t repeat the mistakes of his predecessor. Merrill ishis firm now. Look at his track record; listen to what he says. ■

“Because we’d been sosuccessful doing a number

of things, we came tobelieve that if we just did

more things in moreplaces, that we wouldcontinue to be equally

successful withoutnecessarily thinking aboutwhat was required in order

to make it a reality, oradequately testing the

assumptions that underliethe business thesis”

Stan O’Neal


060Merrill Feature F 3.7.06 13.06 Page 60 Cover story How Stan … · 2018-12-21 · see unfounded...

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