To make the $9.5 billion merger with Merrill Lynch work, BlackRock is looking overseas not only for customers but for money managers, too, according to The Wall Street Journal. “Global capital markets are growing faster than in the U.S.,” said BlackRock founder and Chief Executive Laurence Fink, citing an increase in overseas initial public offerings and buyouts. “It can’t be an American-dominated culture, or you will fail,” he said. Announced seven months back, the BlackRock-Merrill deal guaranteed BlackRock, famous for its management of bonds and institutional investments, control over Merrill Lynch Investment Management, shooting the company with $464 billion under management to among the top dozen biggest managers in the world. For Merrill, the deal meant 49.8% ownership in a company that would bring with it experienced money managers and well-established distribution channels for its products, which its own brokers were reluctant to sell, fearing conflict-of-interest concerns. Fink said that U.S. firms typically treat non-U.S. branches as satellite offices, rather than giving the executives in these offices adequate authority. Merrill Lynch Investment Managers has avoided this pitfall to become the fastest-growing mutual fund provider in Europe, also establishing footholds in Australia and Asia. Still, BlackRock and Merrill face the same challenges of any merging investment companies, including retaining staff, blending corporate cultures and communicating effectively with customers. “People can walk, assets can walk,” said Robert Kapito, head of portfolio management and BlackRock co-founder. Merrill saw that happen after its $5.3 billion acquisition of Mercury Asset Management in 1998, after which several key Mercury executives marched. Merrill is determined not to revisit the experience. A small portion of Merrill groups have experienced layoffs, specifically in the taxable bond and institutional investment sales areas. BlackRock, meanwhile, has aimed to make Merrill employees feel wanted and welcome. Weeks after the merger announcement last February, Kapito was on vacation with his family, when an executive at Merrill called to say two Merrill managers in Australia had resigned. Rather than call the remaining staff to assure them no major cutbacks were in the cards, Kapito left his family and flew to Melbourne to meet with staff in person. BlackRock leaders have “put in some serious time making people comfortable,” said Robert Fairbairn, head of the Merrill European and Asian businesses, and newly appointed BlackRock vice chairman.
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