On paper, the strategy is irresistible: snap up a brokerage house, a mortgage company, or an asset manager and prepare to reap bountiful fee income while firming up ties to customers. So hoping, one bank after another this year has announced ambitious acquisitions of nonbank financial companies.
These deals, however, are notoriously difficult to execute. In addition to contending with the normal operational challenges of mergers, banks buying nonbanks may have to bridge enormous cultural gulfs.
Two deals from the early 1990s serve as cautionary tales. NationsBank Corp. pushed into the derivatives world in 1993 by buying Chicago Research and Trading Group, and Chase Manhattan Corp. extended its reach in the home loan market by buying American Residential Mortgage in 1994.
But, as the following stories illustrate, both acquirers have encountered unexpected problems, from staff defections to rocky markets. Read on.