The deal will likely lead to a new round of Wall Street combinations. The new firm will dominate Wall Street in some areas. It will become the largest mergers-and-acquisition investment banker, and the leading issuer of initial public offerings and other US equities. It will trail Merrill Lynch in research, but will be No. 5 in both mutual-fund networks and asset management. Analysts say the link-up makes sense – it combines Morgan Stanley’s institutional business with Dean Witter’s retail business and asset management.
The value of this type of deal became clear in mid-J anuary, when Solomon Brothers announced a “strategic alliance” with Fidelity Investments, the largest mutual-fund company. Solomon Brothers agreed to sell Fidelity at least 10 percent of any stock offering it is involved with. “It’s a strategic answer to Merrill,” says one brokerage industry analyst who asked not to be named. The companies have different corporate cultures. Morgan Stanley is an aggressive investment banker with a talent for making money on its investments.
Many of its managers have advanced degrees from such institutions as the Harvard Business School. Dean Witter is more like Middle America. It tried to sell securities from Sears, Roebuck stores. It offers a large stable of mutual funds. Morgan Stanley, which is also in the mutual-fund business, has also concentrated on the investment-management business. The combined firm will have enormous financial resources. It will have a market capitalization of $21 billion, pre-tax income of $3. 1 billion, and $12 billion in combined revenues. It will have 3. 2 million customers and 409 offices in 38 countries.
Issues: » Examine the synergies of merger between Morgan Stanley and Dean Witter » Understand the reasons for the success of Morgan Stanley Dean Witter merger during its initial years » Study the role of top management in the success of a merger » Examine the nature of governance issues affecting the business performance of Morgan Stanley Dean Witter merger http://www. icmrindia. org/casestudies/catalogue/Business%20Strategy/The%20Morgan%20Stanley%20Dean%20Witter%20Merger%20Business%20Strategy. htm http://www. icmrindia. org/casestudies/catalogue/paypal/Business%20strategy/Morgan%20Stanley%20Paypal.
htm http://www. allfreeessays. com/topics/merger-of-morgan-stanley-and-smith-barney/0 //////////////////////////// “The combination of Morgan Stanley and Dean Witter, Discover may be as close to an ideal merger as there is, it is based on powerful franchises, high profitability and opportunities for accelerated growth. ” 1 – Philip J. Purcell, 1997. “This is the last nail in the coffin on the failed vision of the financial supermarket, Dean Witter and Morgan Stanley, these pieces never fit together and stapling them together wasn’t the answer.
” 2 – Jeffrey A. Sonnenfeld, Associate Dean, Yale School of Management, 2005. The merged entity was expected to benefit significantly since Morgan Stanley had an established range of corporate finance & investment banking products while Dean Witter had a strong distribution network. Morgan Stanley Dean Witter was to offer a range of products and services to clients at a low cost. The merger was expected to bring in revenues from businesses such as retail brokerage, asset management, and credit cards. The stock markets reacted positively to the news.
On the day the merger was announced, the Morgan Stanley stock rose by 14% to US$ 65. 25 and that of Dean Witter by 5% to US$ 40. 62. Ten months after the merger, the name ‘Discover’ was dropped and the company was called Morgan Stanley Dean Witter. Initially, the merger seemed to be successful. However, there were glaring differences between Morgan Stanley and Dean Witter, especially on the culture front, and these persisted. A few years after the merger, differences between Purcell and Mack came to light and this led to the ouster of Mack in 2001.
The merged company could not escape the bear run in the market in the early 2000s. The total revenues of the company dropped from US$ 44. 99 billion in 2000 to US$ 32. 93 billion by 2002. Net revenues dropped from US$ 25. 99 billion to US$ 19. 07 billion during the same period. Purcell was also criticized for his management practices, which had led to the exodus of several key executives from Morgan Stanley. These events culminated in Mack returning to the company in 2005, replacing Purcell.