Chase Manhattan acquired J.P. Morgan last month, following the trend toward consolidation in the banking industry. Media coverage showed both companies working to capitalize on the potential of the combined company, while also noting the challenge of combining two disparate corporate cultures.
Chase Manhattan acquired J.P. Morgan last month, following the trend toward consolidation in the banking industry. Media coverage showed both companies working to capitalize on the potential of the combined company, while also noting the challenge of combining two disparate corporate cultures.
CARMA research indicated that the merger led coverage in influential media outlets for the week of September 10. The most frequently discussed aspect of the merger was the potential results it holds for both companies to break into the lucrative securities trading and advising market. The focus was frequently on Chase's ambition, noting numerous acquisitions this year aimed at increasing the money-management side of the business.
Analysts praised the merger, saying the companies are 'highly complementary businesses' (Investor's Business Daily, September 14). However, the merger was widely considered to be more beneficial to Chase than Morgan, as Chase gains Morgan's global presence. Chase CEO William Harrison said: 'There's no corner of the world where we can't get a deal done. This is a complete platform' (Los Angeles Times, September 14).
Banking industry research shows Chase outperforming the industry average while Morgan performed below the average in terms of favorability of media coverage.
Many articles focused on the size of the merger and the implications for the industry. Most debate surrounded the reasons behind consolidation; some journalists focused on pressure from a 'merge-or-perish' mentality, although management said the merger made smart financial sense. 'The combination has phenomenal potential,' said Morgan CEO Sandy Warner (The Washington Post, September 14). Analysts didn't necessarily agree. 'This will translate ... to loss of value for Chase shareholders. It's the lemming mentality,' predicted Second Curve Capital CEO Thomas Brown (The Chicago Tribune, September 14).
While the deal was thought to make strategic sense, journalists and analysts saw possible conflict in the merging of the two corporate cultures. Journalists pointed to the history of the companies, noting that founder 'J. Pierpont Morgan thought (Chase founder) John D. Rockefeller was crude. Rockefeller thought Morgan was arrogant and conceited.' (USA Today, September 14).
Analysts seemed concerned that Morgan's investment bankers would leave for higher-brow firms due to Chase's more declasse reputation. 'The risk is that they have to smoothly blend the cultures and keep the key people,' noted one Sanford C. Bernstein analyst (The New York Times, September 14).
A few reports debated whether the merger would benefit their customers.
'History tells us that one-stop shopping does not work. It's not because the companies don't work together. It's because the customers don't like it,' stated a McDonald Investments analyst (Business Week, September 25).
Nonetheless, coverage portrayed both companies favorably. While risks to turn strategic sense into financial success seem unavoidable, the merger is expected to create a company greater than the sum of its parts.
- Evaluation and analysis by CARMA International. Media Watch can be found at www.carma.com.
