The banking world is abuzz over the Dec. 4 announcement that The Bank of New York (New York; $91 billion in assets) agreed to merge with Mellon Financial Corp. (Pittsburgh; $738 billion in assets). The new company, which will be called The Bank of New York Mellon Corp., will be the world's largest asset servicer, with $16.6 trillion in assets under custody, according to a press release announcing the deal. "Together, we will have the scale, the technology, the capital and the people we need to compete and win in the rapidly expanding global marketplace," said Thomas A. Renyi, chairman and CEO of Bank of New York, in the press release.
While the combined organization's future IT infrastructure is not completely known, a webcast following the announcement listed Bank of New York's "real-time, global technology" as a strength that will complement Mellon's client information front end. The new company expects to shave $240 million off its technology budget by 2009. Merger-related costs, however, will total $1.3 billion through 2009, $305 million of which will be technology and facilities related, according to the Dec. 4 webcast.
The Bank of New York Mellon Corp.'s blended management team will include Bank of New York president Gerald Hassell and CIO Kurt Woetzel, who will continue in their current positions. Renyi will serve as executive chairman of the new company for 18 months following the close of the transaction, with overall responsibility for the integration of the two companies. Robert P. Kelly, currently president, chairman and CEO of Mellon, will serve as CEO for the new company and will succeed Renyi as chairman of the board.
Commenting on the deal, Needham, Mass.-based TowerGroup says the companies' technology employees will combine to "form a significant technology force within the custody and securities servicing industry." The merged company will eliminate 3,900 total positions, and TowerGroup analyst Robert Hegarty estimates that about 700 will be technology jobs.
The companies expect the merger to be completed early in the third quarter of 2007, subject to regulatory and shareholder approvals. Beginning in the second half of 2007, they will begin the integration of overlapping business and shared services, a process that is expected to take three years. At that point, the financial institutions also will begin application and system conversion and data center consolidation.
The outcome of the integration is difficult to predict because both organizations have "equally good" technology systems, according to Hegarty, who notes that each firm currently spends more than 10 percent of its revenue on technology, which is above the industry average. The merged institution likely will have to go through an inventory of its technology system by system to decide what to use from the back office out, he says. * --Nancy Feig