Corporate New-Venturing

       

    J.P. Morgan Chase is planning to acquire M-Modal, which offers a cloud-based voice recognition program that uses natural language processing.  The equity investment branch of J.P. Morgan, One Equity Partners, has agreed to take M-Modal private, buying all of its shares for $1.1 billion.  This is said to be the biggest capital venture deal in health IT this year.
     Dick Cashin, managing partner of One Equity Partners says the reasoning for making the deal is, "M-Modal presents a unique opportunity to acquire a market leader in clinical documentation at a time when the company has successfully released its new generation of speech understanding solutions for healthcare."  There will be a tender offer for all outstanding shares of M-Modal no later than July 17, 2012.

Read more: JPMorgan Chase unit to acquire M-Modal in $1.1 billion transaction - FierceHealthIT http://www.fiercehealthit.com/story/jp-morgan-chase-acquires-m-modal/2012-07-03#ixzz1zuZFJAHz

Organizational Structure

    Of the four basic forms of organizational structure discussed in the text, functional, multidivisional, matrix, and network, JP Morgan has somewhat of functional structure and a multidivisional structure combined.  With a functional structure the organization revolves around specific value-chain functions.  Although, "functional structures tend to work best in smaller firms and those with few products or services."  It probably works well for JP Morgan because they started small and grew over the years.
    With a multidivisional structure divisions are organized around geographic markets, products, or groups of related businesses.  They are often self-sufficient, where division heads are responsible for the strategy of a group of businesses or markets.  JP Morgan Chase & Co. owns 5 bank subsidiaries in the U.S.  Their business activities are organized into 6 business segments, one which is investment banking.  The investment banking division is divided by teams:  industry, M&A, and capital markets.
    Operating in more than 60 countries, JP Morgan has also met the challenge of executing globalization strategies.  They have had to adopt one of the four structural forms discussed in the text.  I would say they chose to emphasize local responsiveness where assets and resources are decentralized.  "Control and coordination are managed primarily through the interactions of home-office corporate executives and overseas executives, who are usually home-country managers who've been dispatched to run foreign offices." Whatever structional solution they've used, it has proven to be successful.

Acquisitions: To do or not to do, that is the question?

    How does this acquisition help our firm earn profits?  Should would develop the new business internally rather than buying it?  What are the hazards?  I'm sure these are some of the questions J.P. Morgan's management team mulled over before deciding to acquire Bear Stearns after the affects of the global financial crisis and recession in 2008.  Bear Stearns was on the brink of financial collapse.

    In a matter of days, about 200 JPMorgan employees worked on a deal.  They assessed  the strengths of Bear Stearns business and the risk of bad mortgage securities.  The offering price, at $2 a share was an extreme drop from Bear Stearns' book value of $82 a share.  But it would provide a cushion for JPMorgan and provide "margin for error."

    The deal was expected to close by the end of June and expected to generate about $1billion in after-tax earnings for JPMorgan.  But, JPM would have to focus on keeping clients in that division and working out costs between businesses that both institutions have in common (i.e investment banking, mergers and acquisitions, and research).  They will have to find avenues for growth, especially since JPMorgan did follow through with the acquisition.  They stopped using Bear Stearns name in 2010.

Strategic Alliances

    In 2006, JPMorgan, the investment banking team of J.P. Morgan Chase & Co. and Fidelity Brokerage Company, one of the nation's leading brokerage firms, formed a strategic alliance.  This alliance made a way for Fidelity's clients to participate in new issue equity and fixed income deals lead-managed by JPMorgan. 

    In the past, JPMorgan's fixed-income and equity products were distributed primarily to institutions, hedge funds, and "ultra-high-net-worth" investors through the JPMorgan Private Bank.  Now, JPMorgan is the primary provider of new issue equity and fixed-income products to Fidelity's clients, brokerage and retail.

The importance of forming the alliance:
1.  JPMorgan and it's clients have access to Fidelity's extentsive distribution network.
2.  JPMorgan's clients have the opportunity to reach a far broader set of investors.
3.  It gives JPMorgan a competitive advantage.

    It sounds as if the alliance was a strategic to JP Morgan and only operational to Fidelity Brokerage.  Whatever the case may be, it seems to have been a successful venture.

Going Global

J.P. Morgan Chase has a global mindset.  They
knew the importance of global strategy long
before the new breed of firms that emerged in
the 1990s.  Indeed they were "born global." 
The firm's relationship with China dates back to
1911.  First, they underwrote Huguang Railway's
US$7.5mm bond in 1911.  Next, they opened
offices in China in 1921. Then, they became the
first US Bank to be designated as Bank of China's correspondent bank in 1973.

J.P. Morgan established its presence in Taiwan in 1992 and provides advisory services through Taiwan's largest Investment Bank Firm. The firm has established a presence in Sub Saharan Africa, Europe, and so on.  The Global Corporate Bank was implemented to manage the firm’s relationships with large corporations, financial institutions and public sector organizations globally to solve problems for clients and help them grow.  It seems that they had a Transnational Vision because indeed they developed global efficiency, flexibility, and worldwide learning.

Synergy and Diversification

J.P. Morgan has achieved diversification through internal development and acquisitions.  They offer many products and services that are related.  Their corporate strategy has maintained coherence across business units.  It is one the firms, as read in the text, "are amalgamations of business units operating in multiple product, service, and geographic markets (often globally)."
The firm is positioned for success and is expected to hit new highs in 2013.  They have developed cost-saving synergies and use them to grow its business lines. Follow this link to read 3 Reasons JP Morgan Will Hit New Highs in 2013:  http://seekingalpha.com/article/563881-3-reasons-jpmorgan-will-hit-new-highs-in-2013

Rescaling the Industry

As we read in the text, the financial services industry is currently in the middle of a major rescaling.  Banks went from being heavily regulated to deregulation, giving them room to venture into national economies of scale.  Rescaling in this industry has mainly come through mergers and acquisitions.  Some agencies attempt to rescale primarily through internal growth.

J.P. Morgan is a leading mergers and acquisitions firm.  Their M&A transactions  include asset purchases and disposals, restructuring and reorganization.  The M&A business is critical in strengthing the firm's globally integrated model and  it's growing financial franchise in India. 

The firm itself has a history of mergers and acquisitions.  They started out as the Chemical Bank of New York and have since then undergone reorganization and several mergers.  Here I will highlight a few:

• Chase Manhattan Bank & J. P. Morgan & Co. (merged 2000)
• Bank One (acq. 2004)
• Bear Stearns (acq. 2008)
• Washington Mutual (acq. 2008)