Top dogs at Merrill Lynch, who have been slashing costs for two years, are hinting the big brokerage may be ready to get back on the acquisition trail.
Merrill Lynch CFO Amass Fakahany told analysts yesterday that the firm was looking for “disciplined growth” – which he said could come from deals or internal growth.
Last Wednesday, at a meeting of the firm’s global private client group, CEO Stan O’Neal suggested that he, too, was looking beyond cost-cutting to growing the company.
“We must grow this business,” he told the group of managers at the Grand Cypress Hotel in Orlando. “It’s time to take a bigger bite out of the opportunity set.”
Managers at the meeting interpreted his comments to mean the firm would look for acquisitions – especially since, hours after O’Neal’s speech, J.P. Morgan Chase announced it would acquire Bank One for $58 billion.
In October, Bank of America bough FleetBoston for $47 billion.
Earlier this month, Merrill bought the U.S. equities and options execution and clearing unit of ABN Amro Holding.
We won’t grow “by shrinking our way to glory,” O’Neal is said to have added, addressing the criticism most frequently lodged at Merrill: that it has cut too dramatically in recent years.
Merrill Lynch spokesman Mark Herr declined to elaborate. “We never comment on statements made at private gatherings,” he said.
Analysts do not see Merrill as doing a transformational deal, but concede that the firm may be looking toward hiring as well as considering small to medium-size acquisitions to boost growth.
“Acquisitions are on people’s minds,” said Reilly Tierney, a securities industry analyst with research firm Fox Pitt Kelton.
“But Merrill is not a follow-the-leader type. They need to hire more people and get back up on the league tables right when the business is coming back.”
Merrill showed profits of $1.24 billion in the fourth quarter – up from $539 million for the same quarter a year earlier and a record $4 billion for the full year of 2003.