Merrill/BlackRock integration begins
Merrill Lynch and BlackRock have begun to put in place the senior management team for the private client group of their integrated Merrill Lynch Investment Managers (MLIM)/BlackRock investment business. The interim steering committee has announced that Frank Porcelli, currently chief investment officer for MLIM in the Americas, will be head of the private client group. He will work closely with Anne Ackerley, who will become chief operating officer of the private client group. She is currently head of the private client group at Blackrock. The deal, announced in February, effectively saw Merrill Lynch swap MLIM for a 49.8 per cent stake in BlackRock. The deal valued MLIM at US$9.5bn (although when the deal was announced a 49.8 per cent stake was worth just US$4.65bn based on BlackRock’s share price). The deal also saw PNC Corp. reduce its 70 per cent stake in BlackRock to 34 per cent. Notably, this dilution was effectively tax-free for PNC because of the swap, plus long-term dividend income will also be at a tax-favoured rate due to the minority shareholding. The merger has been heralded in the US as a triumph of dealmaking and tax engineering. BlackRock expands effectively tax free and gains access to Merrill’s deep pockets, product expertise and distribution. Meanwhile, Merrill reduces its exposure to regulatory scrutiny, but profits from the business keep rolling in. In the UK, however, where MLIM originates, the deal has been viewed as a cheap sell-out of a significant international fund management name. At the time the MLIM/BlackRock deal was announced, the management teams acknowledged there would be “a lot of sleepless nights” to pull off the integration. There is undoubtedly feverish activity going on behind the scenes, but the air of uncertainty that continues to surround the merger is particularly bad news for the private client operations. Perhaps this is why the two sides have moved swiftly to put Porcelli and Ackerley in place. Perhaps a similar announcement is also imminent in Europe? Cath Tillotson is head of research at wealth management strategy think-tank, Scorpio Partnership
