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Comment by valuegram | Hacker News Reader

"From H.P., a Blunder That Seems to Beat All"

"The dubious title of worst corporate deal ever had seemed to be held in perpetuity by AOL’s acquisition of Time Warner in 2000"

No mention of Bank of America's acquisition of Merrill Lynch? Within 15 days of the acquisition's close, Merrill recorded an operating loss of $21.5 billion... Leading to a market capitalization loss of $108 billion.

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The article makes a point of comparing the mergers to the broader economic conditions at the time. HP acquired Autonomy and lost money at a time when the computer industry was (and still is) growing.

On the other hand, AOL and Time Warner merged right before the bubble burst and BoA acquired Merrill Lynch at the same time the economy was crashing. Without the acquisition, Merrill would have gone bankrupt anyway and BoA's market cap would have cratered anyway because the entire financial sector was cratering at the same time. In fact, the US government heavily pressured (threatened) BoA into acquiring Merrill (http://www.washingtonpost.com/wp-dyn/content/article/2009/04...).

So no, they're much different cases.

Of course they are "different cases" - there are always separate macroeconomic conditions, and there was government intervention in the acquisition, but the fact still remains on the "worst corporate deal ever" front, BAC acquired a company that lost $20+ billion in the first post-acquisition quarter.

They are not comparable. Its good info and context, but you're overselling it as a comp. "worst corporate deal ever" is shorthand for executive decision. ML was too policy infected to be considered a "real deal" with other options on the table. If you take the "choice" away from the transaction, you are no longer takling about a "deal" in the common sense of the term, IMHO.

True, but everyone else on Wall Street was having similar problems around that time :-)

Yeah, I should have left out the market capitalization delta. There were definitely other factors involved besides the acquisition. The quarterly loss by Merrill was pretty astounding though. Definitely large enough to be involved in any "worst corporate deal" discussion.

BoA got 20B in TARP funds specifically to offset that loss. It's hard to know how much of their further 118B of Federal guarantees against losses and Geithner-knows how much free money from the discount window and Fed purchases of terrible securities can be attributed to their agreeing to buy Merrill.

But I think it's fair to say BoA didn't lose anything close to even 8B by the time the deal was done.

The TARP money wasn't a gift, nor is the money borrowed from the Fed.

It's not easy to know how much BofA actually lost on the deal because much of the reported losses at the time result from marking down assets according to market prices. I have no idea what they are worth now.

The TARP money wasn't a gift

But it included one: when a trade is not FMV the delta is/was the "gift"

Yes, but obviously not the nominal amount. Also, many banks were forced to take it.

IT is a good point, but HP does not have the Fed to backstop their losses, nor to loan them money at almost no cost.

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