Ken Lewis’s deal too far

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As Hugh McColl built North Carolina National Bank into NCNB into Nationsbank into Bank of America, Ken Lewis was the guy who made all those mergers work. McColl was the swashbuckler, Lewis the beancounter. From a 2005 profile in by Fortune by Shawn Tully:

Lewis’s cool restraint impressed McColl. “He always had good credit judgment,” says McColl. “He never fell in love with a company.” But Lewis always liked the consumer business far better than corporate lending–and still does—-for a simple reason: The loan losses in retail tend to be small and predictable, while one big, failed business can blot a balance sheet for years. Lewis’s conservatism about credit is a major reason that, until recently, BofA has focused its expansion on consumer banking. It ain’t sexy, but it pays.

McColl and Lewis could hardly be more different. McColl made deals; Lewis watched the overheads and boosted the sales-per-manager ratio.

That was what seemed so strange about Lewis’s swashbuckling deal to buy Merrill Lynch just over a year ago. It was agreed upon quickly, without enough time for Lewis-style due diligence. And—not all that long after Lewis had declared that I’ve had about all the fun I can stand in investment banking”—it was for an … investment bank.

Merrill does have phalanxes of retail brokers (a.k.a. “wealth managers“) to go with its investment bankers, and maybe the deal will work out eventually. But Lewis won’t be around to enjoy it. After a really really bad year, he’s now on the way out. And I wonder if it’s mainly because he strayed from his beancounter roots at and fell in love.

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