Saturday, April 05, 2008

Was the Citigroup merger wrong?

The merger of Citibank and Traveller's Group in 1998 was one of the most publicised events in M& A history. Now that Citi is in deep trouble, people are questioning the merit of the merger. Adding to the intensity of the debate have been the forthright comments of former Citi CEO John Reed in the Financial times:

"The specific merger transaction clearly has to be seen to have been a mistake," Mr Reed said.

"The stockholders have not benefited, the employees certainly have not benefited and I don't think the customers have benefited because our franchises are weaker than they have been." ...

"Citi's troubles today are a culmination of a set of problems. There has been a general weakening of the management fabric," he said. "If the body loses its immune system, you are going to die of something. The core of what was happening was a lack of supervision and structure at the managerial level." ...

A few months back, the celebrated Daimler Chrysler merger broke down. Are we about to see the end of a long M&A boom?