Risk assessment as a function of a successful merger: Merrill Lynch‐Advest merger

Abstract

Purpose

The purpose of this paper is to examine the communication challenges Merrill Lynch encountered during the transition phase and post‐merger with Advest and the subsequent problems that resulted in drastically fewer numbers of Advest advisors joining, or staying with, Merrill Lynch than was first anticipated.

Design/methodology/approach

The paper is based on interviews with Advest employees at the time of the merger; this case study includes an overview of the anticipated outcomes, the communication strategies employed by Merrill Lynch during its transition phase, and the barriers that contributed to the less than desired results that occurred.

Findings

The paper finds that Merrill Lynch determined that at least 65 percent of Advest's financial advisors would need to join Merrill Lynch by the closing date of the merger in December 2005 for the merger to be determined a financial success. Fifty percent of Advest financial advisors did not join Merrill Lynch by the closing date and, by July of 2006, approximately 80 percent of the advisors had left. Merrill Lynch failed to identify and address the primary concern to this key target audience; the anticipated change in the organizational culture. During the transition phase, Advest advisors gained much of their information from outside sources including competitors' recruiters who focused on the “Mother Merrill” reputation that was antithetical to Advest's organizational culture. The media also served as a primary source of information.

Research limitations/implications

The paper shows that the pivotal issue affecting the success of this merger was the anticipated change by Advest's advisors to the organizational culture. Strategic communications that may have proven effective in addressing this issue during the merger between Merrill Lynch and Advest are not applicable for all mergers.

Practical implications

Risk assessments identify key areas of interests to both internal and external stakeholders. This activity empowers an organization to adopt a proactive approach to effectively communicate with key stakeholders. When a risk assessment is not conducted, or fails to identify key issues, the potential for a crisis increases. Had Merrill Lynch conducted a risk assessment that identified the impending change in the organizational culture as the issue most relevant to Advest's financial advisors, on‐point communication strategies could have been developed and delivered that would have reduced the risk of these employees leaving.

Originality/value

This paper highlights the need for risk assessment during the pre‐merger phase in order to develop and implement targeted communication plans.

Citation

Grantham, S. (2007), "Risk assessment as a function of a successful merger: Merrill Lynch‐Advest merger", Journal of Communication Management, Vol. 11 No. 3, pp. 247-257. https://doi.org/10.1108/13632540710780238