Merger of Equals: The Integration of Mellon …A).pdf · Merger of Equals: The Integration of...

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________________________________________________________________________________________________________________ Professor Ryan Taliaferro, Senior Lecturer Clayton Rose, and Global Research Group Senior Researcher David Lane prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2009, 2010 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

R Y A N T A L I A F E R R O

C L A Y T O N R O S E

D A V I D L A N E

Merger of Equals: The Integration of Mellon Financial and The Bank of New York (A)

In mid July 2007, two weeks after the transaction closed, and some seven months after the December announcement that Mellon Financial and The Bank of New York would merge to form the world’s largest securities services firm, Timothy (Tim) Keaney and James (Jim) Palermo, co-heads of the new BNY Mellon’s asset servicing business—a business at the heart of the new firm and an essential part of the world’s financial infrastructure—realized that their technology integration plan might be too risky. Previously approved by the firm’s merger integration committee (MIC), the plan committed BNY Mellon’s asset servicing business to achieve $180 million in annual cost synergies, primarily from the elimination of redundant and inefficient systems. Yet, after months of planning since the January 2007 formation of the asset servicing integration team, it became clearer that obstacles posed by meshing the sprawling and complex legacy systems might jeopardize client service quality, and thereby seriously impair the prospects of the emergent firm.

The BNY Mellon Merger

Founded by Alexander Hamilton in 1784, The Bank of New York was the oldest U.S. bank. At the time of the merger announcement with Mellon Financial, The Bank of New York emphasized asset servicing, corporate trust, and treasury services; in addition, the firm also maintained a smaller asset management business. The asset servicing business held $12.2 trillion in assets under custody (AUC), while the asset management business invested $179 billion in client funds (assets under management, or AUM). Earlier in 2006, the bank had traded most of its retail banking business for JPMorgan Chase’s corporate trust unit, doubling the size of its debt issuance recordkeeping business and focusing The Bank of New York’s asset servicing business primarily on serving other financial institutions.1

Mellon Financial Corporation was founded in 1869 in Pittsburgh, Pennsylvania, and into the twentieth century lent heavily to historically important U.S. industries, nurturing key early players in the aluminum, electronics, financial services, oil, and steel industries.2 Its business model had changed over the years, and at the time of the merger announcement Mellon Financial ran three key businesses: private wealth management, asset management, and asset servicing. AUM totaled $918 billion,3 largely on the basis of acquisitions: in 1992, Mellon Financial purchased Boston Company for

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$1.5 billion, and in 1994 Mellon paid $1.85 billion for Dreyfus Corp., then the sixth largest U.S. mutual fund company.4

The merger5 of The Bank of New York and Mellon Financial would create the world’s largest securities services and asset management firm, with $16.6 trillion in AUC, $8 trillion in assets under trusteeship,a and over $1.1 trillion AUM (see Exhibit 1).6 With a combined market capitalization of $43 billion, BNY Mellon would rank as the 11th largest U.S. financial institution.7 At the end of 2006, the combined company had revenues of over $12 billion, with asset servicing comprising 28% of revenues; clearing, issuer, and treasury services contributing another 38% of revenues; and asset and private wealth management the remaining 30%.8 Nearly 25% of combined revenue would come from international sources.9 The combined company would serve 100 markets from offices in 36 countries.10 BNY Mellon’s estimated pretax earnings for 2007 were $4.5 billion11 (see Exhibit 2 for summary legacy bank financials).

Over a three-year integration period, BNY Mellon expected to realize $700 million in annual cost savings, equal to about 8.5% of the combined company’s 2006 expenses. During this period, reductions in force were expected to reach 3,900, nearly 10% of the combined company’s workforce of 40,000.12 Headquarters would be consolidated in New York, though executives said that BNY Mellon would continue to maintain multiple business lines and administrative functions in Mellon Financial’s hometown of Pittsburgh, citing the lower costs of doing business in western Pennsylvania relative to Manhattan.13

Under the terms of the merger agreement, announced at 6 am on December 4, 2006, Bank of New York and Mellon Financial shareholders would receive 0.9434 and 1.0 shares respectively in the new BNY Mellon for each legacy share that they owned.14 The market sent Mellon shares up by 6.6% in pre-opening trading to $42.70, and boosted Bank of New York shares by 7.8% to $38.25.15 The shares closed at $42.78 and $39.75 respectively for the day,16 increasing the transaction’s value by $1.1 billion, to $17.6 billion.17 More broadly, the Dow Jones Industrial Average was up 0.74% and the Standard & Poor’s 500 Index was up 0.89% for the day.18

Outside Opinion

Analysts viewed the logic of the merger positively. For example, David George of A.G. Edwards noted: “from our perspective, this is an excellent transaction as it creates a securities servicing and asset management behemoth that can rival any bank or asset manager in the world.”19 Said Jeffrey Ptak at Morningstar, “Bank of New York will be able to piggyback off Mellon and the presence they’ve established in the asset management world. [But] they’re a bigger player [in the corporate trust business]; Mellon doesn’t have nearly the same presence. So it’s a chance for Mellon to piggyback on the Bank of New York’s presence there.”20 Highlighting cross selling opportunities, analysts also observed that The Bank of New York had a successful institutional asset management business, but that Mellon outshone it in retail asset management. They expected BNY Mellon to consolidate retail asset management under Mellon products even as the merger now would make available Bank of New York institutional funds to Mellon Financial clients.21

However, analyst opinion was more cautious regarding the integration, suggesting that the banks’ differing computer systems and corporate cultures posed challenges. Inadequate integration of asset servicing capabilities could have a severe impact on clients, said one: “Mellon and The Bank of New

a Asset owners, such as mutual funds, appoint custodians to track their portfolios and provide timely reporting of relevant data. Securities issuers, such as firms issuing bonds, appoint trustees to monitor the issuing firm and to inform investors of relevant events, such as payments of scheduled coupons or defaults

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York will have to dot their I’s and cross their T’s in terms of giving clients comfort that this is not going to be disruptive. While investment management performance is important, and nobody wants that to fade, with [asset] servicing, either you get it right or you don’t.”22 Custodian State Street Corporation lost about 10% of the revenue from the Deutsche Bank business it bought, for example, whether due to client service disruption or the chance for clients to renegotiate their pricing.23 Melding different corporate cultures might create other obstacles: “The personality is a little different,” said one consultant. “This is a formidable integration challenge.” Bank of New York managers were said to be “hard-charging” relative to their “more laid-back and casual” peers at Mellon Financial.24 But CEO Robert (Bob) Kelly (Mellon Financial) had already anticipated this: “’Lose no customers’ is our rallying cry,” he said in a conference call with investors.25 CEO Thomas (Tom) Renyi (The Bank of New York) emphasized the point: “[Integration] has a lot to do with growth because, in fact, through a successful integration, there will be no disruption, no distraction. And our first and foremost thesis behind our integration is to lose no customers—to clearly maintain the momentum and growth that both companies have been able to develop over the past several years.”26

A Merger of Equals

Both sides termed the deal a merger of equals. Even so, “many investment analysts and news accounts rejected that as neutral posturing and tried to apply the familiar ‘acquirer’ and ‘seller’ labels. What was startling was the lack of consensus even on this point,” said one account.27 This was because, said BNY Mellon CFO Bruce Van Saun, “Both parties bring very high quality business franchises to the table, so we wanted to look at the respective contribution of each franchise in terms of how we split key management roles, board roles, and the exchange ratio to make it as close to a true merger as we could.”28 Analysts remained skeptical. Companies attempting mergers of equals “don’t begin with a single way of doing business, and you have to look at everything: Who’s the best person for the job, and what’s the best system to use,” said one. “It causes immense headaches, and you often develop an adversarial relationship, particularly depending on how the leaders work together. People become uncertain of their future, and that brings out the worst in people.”29 Except for the CEO, the Mellon Financial executive team had worked together for about six years; the Bank of New York executive team had worked together for about a decade. At neither firm was there a dominant minority shareholder, nor did executives and directors own more than 5% of either firm.30

Robert Kelly

Bob Kelly, the Mellon Financial CEO selected as CEO of BNY Mellon, had been in the role in Pittsburgh for less than a year, hired away from the post of CFO at Wachovia in part on the basis of the reputation he had developed through several successful integration efforts. Kelly worked on Wachovia’s $13.4 billion merger with the First Union bank (where he had previously served as CFO), the merger of Wachovia’s retail brokerage with that of Prudential Financial, and the acquisition of SouthTrust Corp. According to one analyst, “Robert Kelly is well-respected and an accomplished dealmaker. Wachovia did a good job folding the businesses they bought into the company, and that’s been a key to their success and a feather in Kelly’s cap.” Agreed another, “He lays out the plan and says exactly what will happen on a play-by-play basis. He articulates who will be doing what in terms of making it happen and has delivered, and that’s brought him tremendous credibility with Wall Street and shareholders.”31 Some attributed this to his management style: “He has a self-deprecating style and is very approachable. He’s a straight shooter who tells you how it is, and he doesn’t beat around the bush, even with bad news.”32


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Pre-Announcement Planning

Much work was done before the merger announcement. This included selecting the senior management team, as well as designing the integration process and the guidelines that everyone was to follow in its execution.

Senior Management

Both parties knew it would be best to name the BNY Mellon senior management team on the date of the merger announcement. Like the discussions over deal price and headquarters location, the negotiations over the composition of the senior management team were primarily between the two CEOs. The immediate objective was to name business leaders for BNY Mellon and the central management structure, but in many areas, particularly shared services, there was a lot of overlap between the two legacy banks. Among the lines of business, asset servicing had significant overlap. (Exhibit 3 lists BNY Mellon business lines and shared services)

Tom Renyi, Bank of New York chairman and CEO, was named chairman of BNY Mellon for 18 months. Mellon Financial’s president, chairman, and CEO Bob Kelly would serve as BNY Mellon CEO and replace Renyi as chairman after 18 months. Gerald Hassell, president of The Bank of New York, would hold the same position in BNY Mellon. (Exhibit 4 shows a high level BNY Mellon organizational chart at the time of the merger announcement.) The BNY Mellon board (see Exhibit 5) would comprise 10 directors designated by The Bank of New York and eight directors designated by Mellon Financial.33

Once the business heads were named, they moved quickly to hold due diligence meetings with the business line leaders at each bank before the deal was approved by both boards and announced. The business heads sought to validate or revise the initial “top-down” estimated cost savings generated by the senior merger deal team during a meeting on November 4, 2006 at a New York hotel.b (Exhibit 6 shows calculations made at that meeting.) Recalled Bank of New York vice chairman Donald (Don) Monks:

Compared to those [cost savings estimates] we had come up with in a top-down fashion, the line of business managers looked at their businesses from the bottom-up. It was very important that people were signed up to these goals immediately. I knew we could take 40 people out, for example, simply by virtue of having worked in the business. How that was going to happen I left to others, but I knew intuitively that it could be done. I didn’t worry about the details how. But having these financial metrics was very important. We were close, thank goodness. Goals were developed using these two estimates.

Board Integration Committee

As part of the merger agreement, The Bank of New York and Mellon Financial created a board committee on integration, comprising two members of each bank’s board with prior integration experience. Commented integration co-head Steven (Steve) Elliott: “This was not an afterthought. The idea was to implement best governance practice, but this committee was in fact a key success factor, as the board got management to swing right behind it. Tom Renyi, who had experience integrating Irving Trust into The Bank of New York, was the biggest proponent of this committee.”

b The meeting included Bruce Van Saun and Don Monks of The Bank of New York and Steve Elliott and Michael Bryson of Mellon Financial. See Carliss Y. Baldwin and Ryan Taliaferro, “Mellon Financial and The Bank of New York,” HBS case No. 208-129, revised December 15, 2008 (Boston: Harvard Business School Publishing, 2007), p. 7.


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The board committee included Ruth Bruch (a Mellon director), previously CIO at Kellogg; Nicholas Donofrio (a Bank of New York director), an executive vice president at IBM; chair Robert Mehrabian (a Mellon director), Teledyne chairman and CEO; and William Richardson, a former Bank of New York director. Elliott praised the group’s contributions. For example, he said of the committee: “They were very direct and very thorough, and technology oriented, which was valuable because so much of our integration was technology-based. They put us through our paces.”

Merger Integration Committee

To supervise the overall integration process, Elliott and Monks co-headed the Merger Integration Committee (MIC), a group of senior executives charged with overall responsibility for merger integration. Other MIC members included Chairman Tom Renyi, Bank of New York CFO Bruce Van Saun, Mellon Financial Human Resources Director Lisa Peters, Mellon Financial CFO Michael Bryson, and Bank of New York Chief Risk Officer Todd Gibbons. Said one senior executive, “We stacked MIC with skeptics, professional skeptics inside our company, the people who say, ‘it won’t work’, ‘you aren’t pushing hard enough.’”

The role of the MIC was, in Monks words, “to create urgency around strategy and retain a sense of fairness.” Elliott explained: “The MIC met weekly with the primary purpose of handling things that were not going well or were falling behind schedule. These meetings were held without one’s peers in the room, just the committee and the line of business team. There were strong personalities, sharp questions.” There were two paradigms to how MIC dealt with lines of business, low or high maintenance. For the low maintenance groups, there were no surprises, and the MIC required only independent verification by a team of outside consultants. For high maintenance groups that were not quite at their targets, the MIC embedded merger and integration (M&I) representatives within the business unit to help execution.

The MIC also required detailed financial reporting, “too many data points for error to exist,” said Monks. “For example, we wouldn’t just state the monthly number of people who left a department. We would have individual names, their dates of departure, and so on.”

Management Office

To administer the integration program, BNY Mellon established a management office (PMO), headed by Barrie Athol (Mellon Financial) and John Roy (The Bank of New York). Athol and Roy were chosen by the legacy bank CEOs before the merger announcement was made, Peters said, because “we wanted to staff PMO with people who would gain respect in the new company and be able to flow back into the firm after PMO.”

As with the MIC members, PMO and operations-level integration team leaders were chosen from among the combined company’s ranks of proven leaders. According Peters, these were relationship-driven individuals, able to get work done through others.

It was the PMO’s job to work with the integration teams assembled by each business unit and shared service to facilitate their success. According to Athol, the PMO’s job was to “get the teams to succeed,” not “beat them up” for any existing gaps.

See Exhibit 7 for a schematic representation of the merger integration organization.

Accounting and consulting firm Deloitte was hired in December to help facilitate aspects of the integration process. Deloitte offered project and process management tools for this purpose, though


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the PMO and other BNY Mellon managers adapted and improved these tools as integration proceeded.

Guidelines

A handful of operating guidelines motivated all aspects of the merger. “The messages were very simple,” Peters noted: “’Lose no customers’; ‘Build a high performance culture’; and ‘Attract and retain for the future of the company.’ ‘Lose no customers,’ in particular, was a kind of oath taken from the beginning.”

Varied metrics tracked congruence with these guidelines, Peters noted: “One high level goal was a high performance culture in our company. So, we asked whether people were reading communications and measured employee engagement levels and readiness for change. We used metrics to see if things were improving. The messages were simple but execution was complex, and we always came back to achievement against those objectives. We knew we believed in those messages to begin with.” To help monitor progress within the business units, a five-page dashboard of ongoing events was available to the board that was traceable to the lowest level of the organization. Monks described it as “direct relationships between the top and the bottom, without any indirect proxy variables.”

The firm’s management recognized that it would be necessary to leave many decisions in the hands of managers several levels down in the organization. Athol explained, “The company today is materially larger than either legacy company was. There’s a profound difference going from 20,000 to 40,000. You can’t manage the firm by micromanaging, you must leave it up to the lines of business to achieve their goals.”

Integration Objectives

BNY Mellon executives, including the MIC and PMO, aimed to create in BNY Mellon the best of both legacy companies, optimizing four different objectives: melding a corporate culture, achieving cost synergies, containing merger and integration (M&I) spending, and achieving revenue synergies.

Corporate Culture

The cultures of the legacy banks differed in their levels of centralization. The Bank of New York was traditionally more hierarchical, whereas Mellon Financial tended to delegate managerial discretion to the individual business units. The question was thus how best to reconcile The Bank of New York’s tradition of limited managerial risk taking with the relatively more empowered Mellon Financial style. Kelly and Peters spent the plane ride back to Pittsburgh following the merger announcement discussing their objectives on culture. Recalled Peters: “We took a very studied approach to what we were doing, working together, formulating a shared view on the culture of the new company. Activities took place from December through June at the most senior level around formulating the culture and values that we wanted to demonstrate.”

In April, BNY Mellon conducted a beliefs audit of both bank management teams. This comprised a survey and interview asking each executive to describe his firm’s corporate culture. They gathered offsite to hear the results, as Peters described: “Some traits overlapped and some were very different. There were big discussions about the overlapping traits—the good, the bad, and the ugly.” Then the executives broke into teams to consider a common set of values for the new company, returning to seek consensus over both the values and their credibility to the group. The consensus was to make


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BNY Mellon a high performance organization, emphasizing the core values of client focus, trust, and teamwork.

Cost Synergies

On the basis of the November 4 meeting, the team had calculated that the merger could realize $700 million in estimated annual cost synergies within three years of the legal close. This amounted to about 8.5% of the combined company’s 2006 expenses. Reductions in force would total roughly 3,900 employees of the combined company’s 40,000 employees. Much of these cost savings were expected to come from the elimination of redundancies in shared services, though legacy bank managers anticipated significant overlapping resources in their asset servicing business lines as well. During the six months following the July 1, 2007 legal closing, BNY Mellon committed to saving an annualized $210 million without material M&I spending. Savings would come from the elimination of duplicative budgeted projects, the realignment of staff and targeted layoffs of redundant staff, and the renegotiation of vendor contracts (see Exhibit 8). Thereafter, BNY Mellon had committed to annual savings of $350 million in 2008, $595 million in 2009, and $700 million in 2010 (later raised to $850 million). These synergies would come from lower headcount from operational consolidation and streamlining, moves to lower cost locations, process improvements and efficiency efforts, and systems conversion and decommissioning.

In creating these synergies, integration teams at the operations level had to take care not to allow measures such as reductions in force to impede operational growth and control, let alone constrain normal business activity. Doing so would not be easy. Monks suggested one reason why: “Publicizing the numbers early was good because we could hold people to them later: ‘You said you could do this, now get going on it.’ For us, the big numbers were in Asset Servicing and Technology, but the rest had to pull their weight too.” Together these groups accounted for over 50% of the firm’s cost synergies, with Technology responsible for about $265 million, and Asset Servicing $180 million of the 2010 goal.

Merger and Integration Costs

BNY Mellon planned for $1.4 billion in one-time merger-related expenses, spread across the business lines and shared services. This amount would cover the costs incurred in closing the deal and integrating the two firms, such as the expense of the integration teams, severance, consultants, and legal and investment banking fees. Integration teams at the operational level had the discretion to spend the M&I money on what they thought appropriate, including on bonuses for targets met that could equal as much as a year’s salary.

Noted Elliott, “Our objectives in the integration were revenue retention and client satisfaction, not creating a lowest cost model. The question was how much M&I money we needed to get there. These were the basis of the tradeoffs faced by the MIC. We didn’t go for perfection when practical solutions existed; you have to be practical.”

Revenue Synergies

BNY Mellon was careful not to state explicit revenue synergy targets when it announced the merger. This was in part due to the difficulties inherent in reaching them, but also due to the desire not to overpromise. Said Monks, “We can tell the Street that we know the revenue synergies are there, but they won’t believe it because almost no company delivers. The Street is always skeptical. But if you can do the cost control, the revenues will follow. ‘Lose no customers’ will help growth while also being believable.”


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As a result, except for efforts to create a global account sales force whose cross-selling progress was closely tracked, BNY Mellon management left the discovery of revenue synergies to each line of business.

Integration Process

The MIC had overall responsibility for the integration, and as such made all final decisions. The PMO had day-to-day oversight of the transition. The PMO defined and coordinated the integrating, planning, and reporting process with the business units and shared services, and it provided tools to ensure consistency in process and approach. The PMO was also tasked with ensuring that interdependencies were identified and addressed, both across business groups and between lines of business and shared services such as Technology, and to this end the PMO coordinated nine cross-department groups.

The eight business lines and 13 shared service groups were responsible for developing their own integration plans for formal presentation to and approval by the MIC, though the PMO could offer coaching and shared best practices as they emerged. Thus, while integration targets were set at the top with input from the business units, the unit-level integration teams had free rein to determine how best to accomplish them within the limits defined by the M&I budget.

Dedicated M&I representatives worked in all lines of business. Athol explained the importance of dedicating human resources to the integration process: “We were very strict at the start about insisting on dedicated resources for the merger and integration. This is rare to see in the financial industry, but you can’t manage integration off the side of your desk. If we merge while doing business as usual we will lose customers. There’s a very high relationship between merger success and dedicated resources.” Paid out of M&I funds, at the height of planned integration activities, the M&I representatives would eventually number 650 people. However, as Monks pointed out, “Very few people worked in the core. They developed allegiance to the core but were tied to line groups. They made sure the numbers were right locally.”

The three year integration process would proceed in a series of seven planned stages, in what senior executives dubbed “management by event,” and would take place in two phases—after announcement of the deal but before it legally closed in early July 2007, when the two firms would have to operate independently, and the period following closing when they would be a single legal entity. The first three stages would occur prior to the closing. Joint teams of senior managers from within each line of business and shared service of the legacy companies would develop and present their integration plan to the MIC for approval. In most but not all cases, integration team members would stay on at BNY Mellon in their original business unit once their integration duties ended.

Integration plans were detailed and had explicit goals, progress toward which was indicated in a common template by green, amber, and red arrows. The colors signaled the degree of progress being made, with green meaning “on target,” amber denoting issues of some criticality and potential for time slippage, and red denoting issues with a high degree of criticality or potential for slippage. The direction of their arrows denoted progress trends, with an upward (or downward) pointing arrow meaning progress (or slippage) from the previous week.

In formal management meetings, each business group and shared service presented its integration plans before the MIC. A standard template was used, which allowed discussion of a handful of subthemes that varied by group. These two-day meetings occurred over the course of the three year integration period. Stage One was held at the end of January 2007, and required integration teams to identify a target state for their individual businesses and the key challenges involved in realizing


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those targets. To do so, managers first presented their current-state statistics, organization charts, client delivery models, and technology and operations models. Then came an outline of integration objectives, including what the teams believed the integrated business units would look like with respect to organizational design, staffing, and business strategy, followed by notice of other relevant considerations for each business line, such as legal and regulatory requirements,34 interdependencies, and other opportunities. Stage Two presentations occurred in mid April, and addressed: (1) how each group would deliver their 2007 synergies; (2) their plans for the synergies of 2008 and beyond; (3) projected M&I expenses; and (4) feasible revenue synergies. The Stage Two presentations also defined business unit organizational structure and personnel through the third tier of management, and a statement of the key unresolved challenges arising out of each business’s integration plan. Stage Three presentations were planned for late June, and focused on readiness for post-closing business as usual, in addition to detailed integration planning documents and performance against M&I spending targets to date.

The object of these formal meetings was to generate an overview of the company’s progress through an examination of organizational design, mobilization status, key issues and obstacles, synergies, and financial plans. The meetings also provided a forum for the identification of major interdependencies, such as the need for product and market-facing coordination, cross-organizational workstreams, and inter-team dependencies.

Elliott described the scene: “Everyone attended the events. The Executive Committee was at all events early on. Certainly the Executive Committee attended the first three stages. It was tightly managed, scripted, and measured. There’s nothing like presenting your own integration plan to your peers at the same time. People did want to perform their best before senior management, but they also challenged each other.”

Athol explained the PMO’s role in facilitating success: “We’d work ahead of time and coach as much as we could, give help in presenting and communicating. We’d go back after the presentation and tell them how to improve. We wanted to avoid embarrassment in big meetings. That would be the worst thing that could happen, to feel like you are failing. The PMO was a cross between an umpire and a coach.”

The legacy company business lines and shared services moved quickly after the merger announcement to establish jointly staffed integration teams. During the seven months between the merger announcement and the deal’s legal closing, however, information sharing between the two companies was tightly controlled. Until early July, the two firms had to abide by strict legal boundaries on what information they would be able to share and what work they could engage in jointly. This limited the amount of practical planning any team could accomplish. While the teams could develop an understanding of broad outlines of the other’s capabilities, only on “Day One” of the new BNY Mellon—when integration plans were to be set in motion—would essential competitive information such as client names be shared.

Integrating the Asset Servicing Business

The Asset Servicing Business

The custody and asset servicing industry catered to the $128 trillion global securities market.35 According to globalcustody.net, the top 50 global custodians serviced $88 trillion in assets at the beginning of 2007, and 63% of these assets were serviced by the top six players. At that time, The Bank of New York, with $12.2 trillion in client assets under custody, and Mellon Financial, with $4.5 trillion in client assets under custody and administration, were the number two and number six


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global custodians, respectively.36 The combined company’s asset servicing business was thus at the heart of the world’s financial system, handling over half of the world’s transactions in U.S. Treasury instruments, for example, and serving as custodian for perhaps 20% of global financial AUC.

In 2006, Mellon Financial’s asset servicing business earned $261 million, representing 20% of the firm’s total earnings before taxes. While Mellon Financial’s asset servicing division was significantly smaller than its asset management division, it was still a highly visible and profitable group. For example, in 2006, the division’s assets under custody grew by 15% and its net income rose by 37%.37 Furthermore, Mellon Financial was frequently ranked #1 in client service by the R&M Global Custody Survey and the Global Investor Global Custody Survey.38

The Bank of New York’s businesses revolved around back office processing. Its custody and asset servicing businesses were global leaders. Unlike Mellon Financial, it also operated complementary trade execution and trade clearing services, helping clients with securities trading and subsequent transaction recording. Combined, these divisions earned $1.3 billion in 2006, representing 60% of the firm’s pretax earnings. Even before the merger, The Bank of New York was a critical player in the operation of global financial markets. It cleared approximately 50% of all U.S. Government securities transactions and was the top global collateral management agent with $1.3 trillion in balances. It was also a global leader in the mutual fund administration industry, servicing over $2 trillion in mutual fund assets.39

Asset servicing had its roots in securities custody, historically holding in safekeeping the securities owned by third-party clients, sometimes physically in secure vaults, more often now in electronic form. As global markets grew in size and sophistication, custodians expanded their business into value added asset servicing, which included dividend and interest collection, recording of corporate actions such as a stock split, securities lending, proxy voting, and tax processing. Asset servicing clients included institutional investors, such as mutual funds, hedge funds, pension funds and insurance companies, investment banks, brokers, retail investors and corporate investors, as well as central banks and sovereign wealth funds (see Exhibit 9).40 Such back office processes effectively permitted clients to outsource an increasing part of these tasks and thereby shift their fixed to variable costs.

Such back office processes could be most lucrative for custodians when their enormous investments in IT and systems integration were used by the largest possible number of clients. Noted Kurt Woetzel, BNY Mellon’s chief information officer, “Technology is the foundation of how we deliver and interact with our customers.” Both The Bank of New York and Mellon Financial spent more than the industry average on IT. In 2006, The Bank of New York spent $850 million, or 11.3% of revenue, on IT; Mellon Financial spent over $550 million, or 11% of revenue. Other large custodians spent on average 8%-9% of revenues on technology.41 As a result, success in the asset servicing business was closely linked to transaction volume, and by extension, the size of a custodian’s client base.42 “It’s a business of dimes and nickels, not dollars,” said one industry adviser, “so it pays to be the low-cost, high-volume producer.”43 Added Monks: “Size gives synergies. This is particularly important. Size allows you to get the most from technology. This is a technology-driven business.” The combined company made $1.9 billion in net income from asset servicing in the first nine months of 2006 alone.44

Setting the Stage

As elsewhere in the organization, the Bank of New York and Mellon Financial executive teams wasted no time in getting to work once the two CEOs and their boards believed that a deal was possible. On the Mellon Financial side, CEO Kelly informed his head of asset servicing, Jim Palermo, of the proposed deal on November 12, just before Palermo attended an investment conference with


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his counterpart at The Bank of New York, Tim Keaney. The pair was given 48 hours to decide whether they could or would work together to run asset servicing for BNY Mellon. If they determined that they would not be comfortable working as co-heads, a single leader would be chosen by the leaders of the two firms.

The prospect of co-heading the business excited neither man. Recalled Keaney, “My first professional reaction was, ‘This [merger] is terrific.’ The disappointment was, ‘You are not running it on your own.’” Palermo felt similarly: “I had co-headed before, but my preference was not to.” Keaney speculated why a team approach might be warranted: “I think they would have preferred to pick one of us. My business was much larger than Jim’s, but Jim had leading quality ratings. If you asked Bob [BNY Mellon CEO], he would say, ‘I can’t give the biggest business in the company to someone I don’t know well.’ If I rationalized why, the merger was big enough and execution hinged on how well we did, and that implied two people with the experience of Jim and me.”

These concerns disappeared when each learned the name of his counterpart. Unbeknownst to either Mellon’s or The Bank of New York’s executive team, Keaney and Palermo had joined Boston Company within two months of each other 19 years earlier. “We sat five feet from each other for several years in Boston,” Keaney recalled. “Jim has a picture of his oldest daughter and my oldest daughter in the bathtub together on the Cape. If it wasn’t Jim Palermo specifically I would not have been willing to co-CEO, and I wouldn’t have even started the 48 hour journey of deciding if it could be done. I just wouldn’t have done it.” Palermo agreed: “When I knew it was Tim, we both knew what we were getting into. If it had been someone else, I’d have been against it.” Keaney elaborated: “Jim and I are very client-oriented people. I have great respect for his management skill. Jim and I could trust each other that there wasn’t going to be any misrepresentation or posturing. At the first meeting, when we came together to start the journey, we each adopted a pragmatic, no-nonsense approach, a self-effacing approach to what each organization did better. For me that was 100% of what got me comfortable with being co-CEO with Jim.”

Keaney and Palermo spent several hours at a Boston hotel to consider how to organize and structure the business. Their assessment examined the various parts of their asset servicing businesses through the lenses of client type, geographical location, expected degree of integration required, and internal versus client-facing tasks. They quickly decided to organize BNY Mellon management of asset servicing under a single P&L, making geographic and regional distinctions secondary.

Having agreed to work together, Keaney and Palermo reconvened in late November, this time joined by their unit CFOs and one other colleague each, to make a more detailed assessment of their business and to validate the cost synergies that the merger deal team on November 4 had concluded could be realized in integrating the asset servicing businesses of the legacy companies. The 2010 annual cost savings estimate was reduced from $217 million to $180 million due to a decision to move two business units out of Asset Servicing into different business lines. Fred Ricciardi, who had been doing special projects for the two Bank of New York leaders recalled how things began on a Friday:

Tim and Gerald asked if I could go to a meeting over the weekend. I went with Tim to lead the Bank of New York side of how we would integrate. The targets were top-down, and our goal was to do a four-day, bottom-up assessment to see if the merger would make sense for our business lines. We looked at the synergy targets, how to achieve them, and at what expected cost. We assessed business functions by location, the operating locations we expected to survive, the product and market strengths of each company, and the wiring of our technologies. Another goal was to uncover anything so big that it would break the deal.


12

Separately, Keaney and Palermo met to draft an organizational chart. Noted Palermo: “My experience was that if you can get the people to work out right, you can do anything. So Tim and I were very aggressive in getting people listed with their assignments. That was the best thing we did. We got the structure right, the people in their places, and a technology platform blueprint, with near and end state targets.” Palermo described the process: “We came up with 17 boxes for the business, and then we identified the best people for each job. This probably took two hours. We knew each other’s team well enough. Of the 35-40 individuals from whom to choose, we knew 25-30 in common. It’s a small industry. We agreed on 16 of the 17 very easily. Only one went either way. By chance, of these 17, it turned out that nine people came from one company and eight people came from the other.”

Ricciardi and Daniel Smith (Mellon Financial) co-headed the asset servicing integration team. They spent over a month selecting an integration team from the “A players” at both companies, Smith said. “We gave them an incentive package and held offsites to brainstorm and get to know each other. These teams created the corporate culture, because they worked together before the rest of the company did, and the rest took their cues from how the M&I teams integrated.”

The Asset Servicing Integration Plan

Keaney explained the business logic of the effort on which the team embarked: “The traditional approach for any of these acquisitions is steeped in the thesis that you’ll see more synergies the more simplified your back end [the underlying systems for processing and accounting for client transactions], and the more common systems you share, especially those that benefit from scale. That’s been time-tested in the trust banking business, where it’s typically been the big firm adding the small business to its books.” This pattern characterized both Bank of New York and Mellon Financial acquisitions going back at least 15 years. As a result, the object of the developing asset servicing integration plan was primarily on how many platforms could be retired with the elimination of overlapping legacy company infrastructure. CIO Woetzel said that, of the 3,000 core systems in the legacy companies, “I wanted to retire 40% of them.”

The Initial Plan The initial view was that cost synergies lay in reducing the number of platforms, ideally by putting all clients onto a single platform, which would then permit reductions in force. Keaney elaborated: “One of the first decisions we took was try to pick one system to give us one integrated operation. That certainly would help with management span and control, and it would help avoid duplicate investments in the back office, and will help drive how our operations executives pick business locations and standardize processes. So we started with a set of assumptions that the best way to get that across was to get to one back end system.”

Accomplishing this required, first, an understanding of what each legacy company brought to the table. Recalled Elliott:

We quickly realized that there are two client bases for asset servicing. The Bank of New York had primarily financial institutions as its asset servicing clientele. For financial institutions, customer satisfaction stems from maximizing throughput and processing speed while minimizing errors. Financial institutions trade a lot relative to the endowments, pensions, and defined benefit plans that were Mellon’s asset servicing clients. The endowments and pension plans do much less trading and less movement of funds, but plan sponsors and asset managers wanted access to their data and performance analytics, and had less concern for the things financial institutions wanted.

Palermo pointed out that their different client bases and client service strengths meant they had different computer systems and applications also: “The strength of Mellon’s system was in its


13

performance management and analytics capabilities, as well as Workbench, the client-facing application that delivers portfolio reporting.c Mellon was also more equity-based in its securities lending. The Bank of New York’s strength was in real time cash information, and its fixed income book. The Bank of New York also had newer and more sophisticated back end infrastructure.”

These differences meant that there was in fact less systems overlap than initially anticipated. Said Athol: “The systems had evolved over 15 years and had become grooved to their particular market segments.” This created new challenges, Woetzel explained: “Much was driven by the complexity of things. As the degree of complexity became better understood, the level of customization done for clients over the years helped us realize that the impact to the customer base would guide the direction we took. The concern was that significant change to one customer base could increase customer attrition.” Added another manager: “If asset servicing went with a Bank of New York system, all of the customized features available to Mellon Financial customers would have to be added to the Bank of New York software, but that would be impossible to do within the integration deadline of year-end 2009.”

The Hybrid Plan Working against these challenges while hewing closely to their overarching guidelines, the asset servicing integration team labored for weeks to develop a plan that reached the $180 million in targeted cost synergies. The resulting plan heavily emphasized technology changes rather than cutting front line staff.

What the integration team selected as its target end-state of 2010 was a hybrid platform incorporating the best aspects of the legacy Bank of New York and Mellon Financial platforms, including scalable transaction processing at the back end and a feature-rich client-facing front end. The target platform called for the elimination of several core applications yielding about $27 million in synergies for Asset Servicing, and another $22 million for Technology. Asset Servicing would also realize savings of $23 million annually from headcount reductions. The debate, recalled Smith, “was over spending more early on to achieve more cost synergies up front or coming back later for them.”

Ricciardi explained the team’s thinking:

Both parties were strong and proud of their abilities. Each had something to contribute. Our plan was a hybrid plan that selected the systems that brought the combined company closest to the targeted end-state. Having selected one system, we then needed to fill any gaps in client features and then do whatever wiring was needed to integrate the system into larger technology platform. At the same time we developed a technology plan around the themes of company organization, bank consolidation, the technology requirements of each business line, and the needs of clients, particularly with respect to their conversion to the final system.

Supporting these changes were data centers and technical staff in what BNY Mellon called its centers of excellence. These centers included infrastructure and people in Pittsburgh, Manchester, England, and Pune, India. The Pittsburgh site was a legacy of Mellon Financial’s footprint there, and Mellon had set up the Pune center (southeast of Mumbai) in December 2004. At the time of the merger agreement, the Pune facility employed 700 people. Manchester was a legacy Bank of New York site that had served its London operations. At the time of the merger announcement, The Bank of New York employed 3,000 people in London. Mellon Financial had 2,400 staff in London, Edinburgh, Essex, and Leeds. Five hundred of these positions were reportedly to be eliminated as a result of the merger.45

c Workbench was the online portal that all Mellon Financial used to access information about their accounts and transactions managed by the company. Workbench allowed clients to monitor their transactions and holdings in all relevant time zones and currencies, and to create highly customized reporting for their own use in any of eleven languages.


14

Smith elaborated: “There was discussion about synergies from moving jobs to designated centers of excellence. Some wanted across the board layoffs, but you eventually add back cuts whenever you can. We’d rather add them back at the low cost centers. Pittsburgh was a big campus for everyone. Moving jobs was a more expensive—but more sustainable—way to achieve our cost savings, though: there is less savings in moving jobs than in eliminating them. The two biggest debates were over that and over the platform.”

The team planned to move about 700 jobs to the centers of excellence by the end of 2008. Once the hybrid plan for eliminating redundant systems was well in hand, they believed they could move an additional 1,400 jobs, which could result in annual costs savings of about $50 million. The reason for the phased approach lay in concern to avoid any precipitous loss of talent, noted PMO co-head John Roy: “We worried it would cause a lot of disruption, and worried about the knowledge that would be lost and the knowledge transfer from one to another location. We worried a lot of experience would walk out the door. We worried that would be very disruptive and hard to manage.”

Keaney, Palermo, Ricciardi, Smith, and the legacy company CFOs in charge of asset servicing presented the plan to the MIC in mid June and received approval to launch the integration upon deal closing in July.

July 2007

“The first big part of the six months leading up to the closing,” recalled Ricciardi, “was about creating and staffing the integration team with our best subject matter experts. But over time, as we planned the integration, it occurred to a couple of us that even though it looked perfect on paper, it would be risky to implement. It was a gut feel.”

The challenges lay in the complexity of the systems and the resource limitations the integration team faced in attempting to resolve the complexity issues. The risks came from multiple sources. Said Palermo, “From a technical viewpoint, we found that there was more to do than initially contemplated. We were aggressive in our technology changes.” Keaney added that, “The plan called for ‘big bang’ moves. Flipping a switch would put Mellon volumes on Bank of New York systems. This created huge risk.” Specific risks lay in the integration of accounting systems with the security movement and control (SMAC) system, which Keaney considered collectively to be BNY Mellon’s most complicated trust banking operations. Accounting systems varied by client within each company, Keaney noted:

The kind of accounting for a pension plan is very different from that for a U.K. mutual fund or one in Luxembourg, which differ from that of a central bank or sovereign wealth fund. We decided to select systems that were the most feature-rich for any given client. The accounting environments differed too, because Mellon’s clients were overwhelmingly tax exempt endowments and pension funds, whereas The Bank of New York’s clients were heavily financial institutions.

Having selected an accounting environment with the desire to have a single back end, the legacy BNY back end needed to talk to the Mellon accounting system. But the intricacies of how Mellon connected SMAC to their accounting environment were at odds with the different set up that The Bank of New York had. You had to recognize the complexity of pulling those things apart. Mellon integrated accounting into SMAC so closely as to be almost one system rather than two. We had to pull apart systems to have the Bank of New York accounting system connect to the Mellon accounting system. It sounds easy, but the level of complexity and detail makes it like brain surgery. We are responsible for an asset pool of trillions of dollars. Something failing to work could put us out of business.


15

Not only were any errors transparent to clients in real time, but a custodian bank was legally liable for them. For example, Keaney continued:

What we deliver to clients are corporate actions, income processing, accurate accounting, statement production, and government filings. If any of those fail, we are out of business. Whenever you don’t credit income, you don’t credit purchases and sales, so you don’t have the cash in the account to settle the transaction in question. If that happens we may have to write a check to the client. If conversion creates even one such error that repeats over a matter of days, we could accumulate enough legal liability to bankrupt the firm.

Over time, Keaney and Palermo became concerned that the team might be lulling itself into a danger zone given the complexities of these systems involved. To Keaney, the threshold issue was the seemingly mundane topic of account numbering. Mellon numbered its accounts using seven figures: three letters and four numbers. Bank of New York accounts were 12 numbers. “Finding a way to have Bank of New York systems accept Mellon account numbers proved to be the flash point that led Jim and me to realize that if we needed to take three steps backward to integrate account numbers, the overall integration probably had huge risk associated with it. Jim and I sat next to each other, and we came to the same conclusions at the same time: ‘Time out.’”

In mid July, Keaney and Palermo gathered their team and asked how many members believed the plan would fail. Almost all hands went up. One reminded the group of a system that a previous acquisition brought to The Bank of New York: “Seven years ago, we announced that we would be off that system in year three, but frankly there’s a high probability it will still be operating when I retire.” Keaney interpreted this statement as recognition of the risks in implementing their existing integration plan. “Jim and I could see reality being accepted and embraced around the table. Three of our most respected managers confirmed it,” Keaney recalled. “No one on the team wanted to let us down, but deep down in your belly you knew it had so many risks associated with it, implementation could have been at great cost to our quality reputation. So Jim and I hit the big red stop button.”

With the legal closing of the merger having taken place just two weeks earlier, integration teams throughout BNY Mellon had launched the plans developed and approved over the previous six months. Keaney and Palermo knew that word of their decision to change the asset servicing integration plan would not be met warmly by the MIC, particularly since the firm had just publicly raised its costs synergy target to $850 million. Urgent questions now faced them.


16

Exhibit 1a Largest Asset Custodians, year end 2006 (in $ trillions)

Rank Company Assets under Custody

1 JPMorgan Chase 13.9 2 The Bank of New York 13.0 3 State Street 11.8 4 Citigroup 10.4 5 Mellon Financial 4.5 6 BNP Paribas 4.3 7 Northern Trust 3.8 8 HSBC 3.5 9 UBS 2.9

10 Societe Generale 2.7 Source: Globalcustody.net data, in Vivek Juneja, “Citigroup, Inc.,” JPMorgan North America Equity Research, February 23,

2007, p. 2, via Thomson One Banker, accessed September 2009.

Exhibit 1b Largest Asset Managers, year end 2006 (in $ trillions)

Rank Company Assets under Management

1 UBS 2.15 2 Barclays 1.82 3 State Street 1.75 4 Citigroup 1.44 5 Credit Suisse 1.22 6 BlackRock 1.12 7 JPMorgan Chase 1.01 8 Allianz 1.01 9 Mellon Financial 0.99

10 Legg Mason 0.94 48 The Bank of New York 0.14

Source: CapitalIQ, accessed September 2009.

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18

Exhibit 2b Legacy Bank Revenues by Business Segment, 2005-2006 (in $ millions and %)

2005 % share 2006 % share The Bank of New York Asset management 286 4.7 372 5.4 Wealth management 242 4.0 258 3.8 Asset servicing 1,981 32.5 2,188 32 Issue services 839 13.8 1,219 17.8 Clearing services 1,531 25.1 1,637 23.9 Treasury services 1,029 16.9 962 14.1 Other 181 3.0 202 3.3 Mellon Financial Asset management 1,904 40.3 2,530 47.2 Wealth management 674 14.3 709 13.2 Asset servicing 1,065 22.5 1,316 24.5 Payment solutions & investor services

644 13.6 652 12.2

Other 436 9.2 158 2.9

Source: Casewriter calculations from CapitalIQ data, accessed September 2009.

Exhibit 3 BNY Mellon Business Lines and Shared Services

Lines of Business Shared Services Asset management Audit Asset servicing Communications Client management Compliance Global markets Public Affairs Issuer services Facilities/ General Services Treasury Finance Wealth management Human Resources Hedge fund services Legal Marketing Risk Technology

Source: BNY Mellon.

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20

Exhibit 5 BNY Mellon Board of Directors

Director Legacy Company Directorship

Ruth E. Bruch, retired Kellogg Company SVP and CIO Mellon Financial Nicholas M. Donofrio, retired IBM EVP, Innovation and Technology The Bank of New York Steven Elliott, senior vice-chairman, BNY Mellon Mellon Financial Gerald L. Hassell, president BNY Mellon The Bank of New York Edmund F. Kelly, chairman Liberty Mutual Group Mellon Financial Robert P. Kelly, CEO BNY Mellon Mellon Financial Richard J. Kogan, retired president and CEO Schering-Plough The Bank of New York Michael J. Kowalski, CEO Tiffany & Co. The Bank of New York John A. Luke, Jr., chairman and CEO MeadWestvaco Corp. The Bank of New York Robert Mehrabian, president and CEO Teledyne Technologies Mellon Financial Mark A. Nordenberg, chancellor University of Pittsburgh Mellon Financial Catherine A. Rein, retired SEVP and CAO Metlife Corp. The Bank of New York Thomas Renyi, chairman, BNY Mellon The Bank of New York William C. Richardson, retired president and CEO Kellogg Foundation The Bank of New York Samuel C. Scott III, president and CEO Corn Products International The Bank of New York John P. Surma, chairman and CEO United States Steel Mellon Financial Wesley W. von Schack, Chairman, chairman and CEO Energy East Mellon Financial

Source: BNY Mellon, www.bnymellon.com/governance/index.html, accessed September 2009.


21

Exhibit 6 Proposed BNY Mellon Cost Synergy Spreadsheet, November 4, 2006

Source: BNY Mellon.


22

Exhibit 7 BNY Mellon Merger Integration Organization

Source: BNY Mellon.

Merger Integration PMOHeads: John Roy , Barrie Athol

Merger Integration CommitteeTom Reny i

Don Monks, Stev e ElliottBruce Van Saun, Mike Bry son, Todd Gibbons, Lisa Peters

BNY/Mellon Board of Directors

BNY / Mellon ExecutivesB. Kelly , G. Hassell

Merger Integration Office

Sy nergy TrackingSy nergy Tracking

Asset Serv icing

Asset Management…

Business Lines

Finance

Technology

…

Shared Services

BNY / Mellon Integration Heads

PMO LiaisonSy nergy Tracking

Segment

Cross-Segment

Etc.

BNY / Mellon Integration Heads

PMO Liaison Sy nergy Tracking

Inv estorRelations

IT

Etc.


23

Exhibit 8 BNY Mellon Cost Synergy Planning, 2007

Key Tasks

7/1/07 Ongoing

Expected Outcomes

Synergy Phase Planning

Begin to catalogue ideas to meet synergy objectives and create long term valueTranslate ideas into a financial plan through the synergy planning processAggregate synergy actions, milestones and dependencies and identify gaps with top down targetsIncorporate synergy milestones into the overall integration plan

Today

Financial synergies/plans aligned with Stage II and Stage III presentationsSynergy actions planned at a level granular enough to allow for downstream tracking/execution

Execution

Measurement

Execute on the plan and closely track progressManage variances and escalate issues as needed

Synergy tracking process embedded to planning and budgetingAchievement of established synergy targets

Key Data

Headcount by position and locationNon-Personnel expenseMerger administrative costsInvestments and one-time expenses

Source: BNY Mellon.

210-

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Endnotes

1 Eric Dash, “Bank of N.Y. and Mellon Will Merge,” The New York Times, December 5, 2006, via Factiva, accessed September 2009.

2 For details see www.bnymellon.com/about/history/industrialrevolution.html, accessed September 2009.

3 Daisy Maxey, “Bank of NY, Mellon Deal Likely to Mean Fund Consolidation,” Dow Jones News Service, December 4, 2009, 3:07 pm, via Factiva, accessed September 2009.

4 Keith Reed, “Hub Will Gain Sway in Buyout of Mellon,” The Boston Globe, December 5, 2006, via Factiva, accessed September 2006.

5 For a discussion of the deal’s conception and development, see Carliss Y. Baldwin and Ryan Taliaferro, “Mellon Financial and The Bank of New York,” HBS case No. 208-129, revised December 15, 2008 (Boston: Harvard Business School Publishing, 2007).

6 “The Bank of New York Company, Inc. and Mellon Financial Corporation Agree to Merge, Creates the Global Leader in Securities Servicing and Asset Management,” PR Newswire, December 4, 2006, 6:00am, via Factiva, accessed September 2009.

7 Ibid.

8 Ibid.

9 Ibid.

10 “The Bank of New York Merger & Acquisition Announcement—Final,” conference call transcript, Voxant FD Wire, December 4, 2006, via Factiva, accessed September 2009.

11 Ibid.


13 David Enrich and Simon Kennedy, “Bank of New York to Buy Mellon Financial,” Dow Jones News Service, December 4, 2006, 12:57 pm, via Factiva, accessed September 2009.


15 “Before the Bell: Mellon Shares Up on Takeover Bid,” Reuters News, December 4, 2006, 8:28 am, via Factiva, accessed September 2009.

16 Eileen Alt Powell, “Bank of New York to Buy Mellon Financial for $17.6 Billion,” Associated Press, December 4, 2006, 5:25pm, via Factiva, accessed September 2009.

17 Ibid.

18 “Wall Street Surges on Bank Merger,” Agence France-Presse, December 4, 2006, 5:22pm, via Factiva, accessed September 2009.

19 Eileen Alt Powell, “Bank of New York to Buy Mellon Financial for $17.6 Billion.”

20 Daisy Maxey, “Bank of NY, Mellon Deal Likely to Mean Fund Consolidation.”

21 Ibid.

22 Ibid.


26

23 Paul Davis, “Mellon, BNY Say No Runoff,” American Banker, December 18, 2009, via Factiva, accessed September 6, 2009.

24 David Enrich and Simon Kennedy, “Bank of New York to Buy Mellon Financial.”

25 Jilian Mincer, “Getting Personal: Bank Deal Has Wealthy Clients in Mind,” Dow Jones News Service, December 4, 2009, 3:27 pm, via Factiva, accessed September 2009.

26 “The Bank of New York Merger & Acquisition Announcement—Final,” conference call transcript, Voxant FD Wire, December 4, 2006, via Factiva, accessed September 2009.

27 Todd Davenport, “Would a Deal By Any Other Name Sell This Sweetly?” American Banker, December 11, 2006, via Factiva, accessed September 2009.

28 Ibid.

29 Ibid.

30 Ibid.

31 John Spence, “Kelly Brings Integration Experience to Mellon-BNY,” Dow Jones News Service, December 4, 2009, 2:53 pm, via Factiva, accessed September 2009.

32 Ibid.


34 Before closing, the BNY Mellon deal required, for example, approvals from the Federal Reserve Board, seven states, the NYSE, NASDAQ, and 14 foreign countries; Hart-Scott-Rodino approvals for non-bank subsidiaries; SEC registration of BNY Mellon public debt; and dates for shareholder meetings and other dates of record.

35 Diana Chan, Florence Fontan, Simonetta Rosati and Daniela Russo, The Securities Custody Industry, Occasional Paper Series No 68 (Frankfurt: European Central Bank, 2007), p. 20, www.ecb.int/pub/pdf/scpops/ ecbocp68.pdf, accessed September, 2009.

36 Ibid., p. 14.

37 Mellon Financial Corporation, 2006 Annual Report (Pittsburgh: Mellon Financial Corporation, 2007).

38 Ibid.

39 The Bank of New York Company, Inc., 2006 Annual Report (New York: The Bank of New York Company, Inc., 2007).

40 Nicole Gelinas, “Joining the Competition,” The New York Sun, December 7, 2006, via Factiva, accessed September 2009.

41 “BNY Execs to Run Asset Servicing,” Operations Management, December 28, 2006, via Factiva, accessed September 2009.

42 Eric Dash, “Bank of N.Y. and Mellon Will Merge.”

43 “A Bank Merger that Pleases Everyone—Except Competitors,” The Economist, December 9, 2009, via Factiva, accessed September 2009.

44 Ibid.

45 Ian Watson, “Mellon Boss Gains Upper Hand in Bank of NY Deal,” The Business (London), December 7, 2006, via Factiva, accessed September 2009.

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