Thomas Weisel Case
1.As a Montgomery Securities partner in mid 1997, would you argue for or against selling the firm to NationsBank? Why?
Montgomery experienced great prosperity in the1990’s, its revenue leaping more than sevenfold, from $94 million in 1990 to $705 million in 1997. Most of its success came from investing in fast-growing companies.
On June 30, 1997, NationsBank Corporation of Charlotte, N.C. announced that it was acquiring Montgomery for approximately $1.3 billion, believing that the combination would create one of the nations top full-service investment banks. The acquisition price was about 15 times the firm’s earnings and 13 times its book value.
Before the sale of the firm to NationsBank, Weisel said, “We needed considerably more capital to realize our growth potential and we needed to expand to the debt arena to stay competitive and not lose our clients. I also saw an attractive opportunity to develop a solid private equity practice, but that, too, would take a lot of money.” Therefore, I argue in favor in selling the firm to NationsBank. It was the perfect moment to do it since they did not have enough capital in order to grow the firm and expand it.
Also, Weisel was optimistic about future prospects. He though that the combination of our two companies will be a greet fit since his company was doing well but he only need more capital in order to be a bigger firm so Nationsbank would provide it for his firm. Weisel said, “The breadth of the NationsBank corporate client base with our investment banking, research, and advisory capabilities will create a formidable player in the investment banking area.” This quoted explain that with the help of both firm will be the perfect match in the investment banking area since it would have everything.
In conclusion Thomas Weisel decision to let NationsBank acquire Montgomery Securities was somewhat right. The partnership turned sour after Weisel was being treated as co-head and not like a boss. Even with all these setbacks he was able to gain enough experience to start another successful firm.
2.Why do you think the NationsBank-Montgomery Securities partnership imploded? What lessons can be drawn from the difficulties faced by the partnership about post-merger integration?
One of the reasons that NationsBank-Montgomery Securities partnerships imploded were Montgomery people were supposed to be in charge had co-heads. By summer of 1998, the relationship between Montgomery’s investment bankers and the parent company’s had soured. NationsBankers irked Montgomery professionals by tagging along on sales calls and trying, unsuccessfully, to trim 5% off the firm’s $400 million annual-pay kitty.
They did some movements that contradicted the acquisition agreement that specified that Montgomery would retain autonomy and control over its operations. It was one of the effects that these partnerships imploded.
Thomas Weisel was very disappointed in the sale of the firm because there were parameters that were violated at first. The most difficult part about all this was the unhappiness of many of the former Montgomery people who had followed the led to Nationsbank. He said that “ If I had the chance to do it all again I wouldn’t do the merger.” He was completely regretful.
Banking had lost much of its appeal by essentially forcing outstanding performers to cover mature and seemingly less exciting industries. Talented bankers became bored doing the same types of deals over and over. Over time, they began to see themselves as processors rather that as investment bankers.
The lessons that Thomas Weisel learned from this merger were that he learned that partnerships are not always the best choice, because the other party does not always fulfill their initial agreement. For example, Hugh McColl, NationsBank CEO, treated Montgomery people who were supposed in charge as co-heads. This actions by McColl led Weisel to rethink the partnership and in 1999...
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