Changes underway at Merrill post BoA takeover

In Asia, Sheldon Trainor sets out on his own (though continues as an adviser), Mark Matthews leaves the research team, and the firm sets up a new corporate finance advisory group.
The changes underway at Merrill Lynch as the investment bank tweaks its teams following the takeover by Bank of America are likely to come out in dribs and drabs over the next few months, if not years û after all, as many as 35,000 jobs may be eliminated in the next three years as the two US banks combine.

One transition much talked about in the market regards Merrill LynchÆs head of Asia investment banking, Sheldon Trainor, who has been rumoured to have plans to set out on his own. HeÆs managing to do that û and keep his finger on Bank of AmericaÆs pulse.

Trainor plans to set up his own private equity firm where he can lead principal investing, leveraging his existing relationships in the region. While a source close to him describes his new plans as ôvery low key and very old schoolö, Trainor declined to comment. But he will continue to work as an adviser to BoA, and will receive a salary for this role.

While Trainor stays on the payroll, other reductions are being done, partly to remove the overlap created by the merger and partly to adjust staff levels to the sharp downturn in business activity as a result of the financial crisis. Because of the latter, layoffs will happen across all regions, even though BoAÆs and MerrillÆs businesses are largely complementary in Asia.

BoA has also taken this opportunity to shake up the management at Merrill, both in Asia and globally, as it makes its own choices û although not necessarily its own people û for key positions within the investment banking business. In December, Merrill's Asia-Pacific president Jason Brand was let go and replaced by Nelson Chai, who was most recently executive vice-president and chief financial officer at Merrill.

And in November, Damian Chunilal, Merrill's chief operating officer for the Pacific Rim and head of Pacific Rim investment banking, left the firm after failing to make the shortlist to become the new head of the investment banking division in Asia-Pacific. That role eventually went to Jim Forbes, who has been with Merrill for close to 14 years and was most recently head of global healthcare investment banking, based in New York.

Representatives for Merrill Lynch in Asia have declined to comment on the number of layoffs in the region so far, but sources say people were let go across Asia last week, indicating that the process is now definitely underway. Merrill has about 60,000 employees globally, of which 4,000 are based in Asia and another 1,500 in Japan. Bank of America employs about 210,000 people and has said that it aims to achieve pre-tax cost savings of $7 billion, or 10% of the expense base, over the next four years.

Although the general impression is that the layoffs in Asia will come across divisions, the sources say the equity and debt capital markets teams appear to be intact so far. However, some investment bankers are said to be among those asked to leave last week. Research has also lost some people, including Mark Matthews, who was the chief strategist for Asia. Matthews had been with Merrill since 2005.

But Merrill is not just responding to the current market environment by cutting staff. It is also in the process of setting up a corporate advisory group in Asia, under the leadership of Andrew Cooper who will take on this role in addition to his current job as head of equity-linked capital markets for the Pacific Rim.

The new team will work across products to ensure that the entire menu of solutions that Merrill has on offer will be presented to clients together with advice on what their best options are. Merrill has had similar groups in London and New York for 10 years, but this is the first time that it is taking this approach in Asia.

Straight-forward league-table-type business is widely expected to remain challenging in the first half of the year as the valuation gap between issuers and investors is still quite wide. This is true of both equity and debt, but even more so with regard to equity-linked issuance, which ground to a complete halt in the second half of last year as the credit crisis took its toll and the sharp drop in share prices pushed outstanding convertible bond issues way out of the money.

As a result, 2009 is expected to be more about the restructuring of old deals and of providing rescue capital û situations that will call for more corporate finance advice. And MerrillÆs new group is being set up with this in mind.
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