As Morgan Stanley (MS) puts the ins and outs of its ’09 merger with Smith Barney behind it, CEO James Gorman is opening up on what happened during the financial crisis and what is to come.
“We had been trying to buy [UBS-owned] Paine Webber for two years,” Gorman told the Financial Times last week during a get-together with its top reps in Hawaii.
“We couldn’t succeed in agreeing on a price, because they thought it was worth more than we thought it was worth,” he explained in a story published Tuesday. “We were enamored about consolidation, but we weren’t stupid.”
Thus, instead of picking up about 8,000 advisors from UBS, Morgan Stanley grabbed a 51% stake in 12,000 reps from Citigroup, which it added to its existing advisor force of 8,400.
Of course, market weakness and technology problems did not make the going easy.
“We got kicked in the teeth for months if not years that it was going backwards in value,” Gorman told the newspaper. “If you could withstand a bit of short-term pain, it wasn’t all bad.”
And painful it was, he admits. “We had two platforms. When we did the analysis we said it would cost about $1 billion to combine it. I think it cost $1 billion in the end. We said they’d get a certain functionality, and they did get that functionality. And we said it would happen in three years, and it didn’t; it happened in four. So we were wrong by a year,” the executive said.
But while brokers and clients got major headaches, Gorman says, he was able to suffer a bit less.