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.
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