When it comes to M&A, JP Morgan's (NYSE: JPM) Jamie Dimon is a pro. But, when he agreed to purchase the distressed Bear Stearns Cos. (NYSE: BSC), he had to reinvent the playbook. After all, he had only a couple days to evaluate the transaction.
Well, there's an excellent piece on this in the Wall Street Journal [a paid publication]. Basically, Dimon realized that speed was critical -- as well as real-time communications. In a complex deal, things can implode easily.
For example, JP Morgan quickly setup fiber cables to connect its information technology (IT) system with that of Bear Stearns. This was critical to allow for the unloading of portfolio assets, which helped to reduce the overall risk of the deal.
In fact, JP Morgan has an army of advisers and employees that are combing through many documents and computer files. No doubt, there are thousands of reports trying to track the progress. And so far, it looks like things are running smoothly.
There are many potential landmines for JP Morgan, though. For the most part, the firm will need to aggressively cut costs. But, will this mean that important employees will leave? Or, might the current employees feel demoralized? What if major customers bolt?
Moreover, JP Morgan still has enormous challenges with integrating the computer systems.
Oh, and there are many angry shareholders. As a result, JP Morgan will spend huge amounts on litigation.
So, even though the Bear Stearns deal is likely to close soon, the hard work has just begun.
Tom Taulli is the author of various books, including The Complete M&A Handbook
Does GM deserve a taxpayer bailout?
Boeing could lose $3.5 billion per month if machinists strike
Cramer on BloggingStocks: Dell loses its Street cred once again 
Reader Comments (Page 1 of 1)
5-25-2008 @ 4:56AM
B. Harrison said...
Since the early 1900s, or even earlier, JP Morgan has been a modern robber baron, steadily and progressively increasing their holding of the wealth of the USA.
As much as one might want to criticize how they have achieved some of this wealth, JP Morgan had the "integrity", the restraint, and foresight to not become involved in the subprime mortgage loan debacle. Now they are looking to "cash in" on the folley of the other financial institutions, and foolish investors in those corporations.
I don't begrudge them any profits that they earn; however, I do not see any basis for the American taxpayers to have to "guarantee" any portion of this deal or to absorb any of the unforseeable losses that might arise . . . . that should all be a part of the "deal".
Frankly it would be more equitable for Bear Sterns to have gone through the bankruptcy process; but the nation simply could not afford the panic that would have created. JP Morgan simply is not entitled to windfall profits at the taxpayers expense. The provision of the Federal government "guaranteeing $30 Billion of the worst loans" is unconscionable.
Now that we are past the initial panci, ther terms of the deal for JP Morgan need to be stricltly a market transaction without any government "guarantees" at taxpayer expense. That is merely a redistribution of the losses to those who did not participate in the irresponsible speculation.