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Manhattan Corporation

In: Business and Management

Submitted By joelgzm
Words 11738
Pages 47
Harvard Business School

9-298-016
Rev. April 2, 1998

Chase Manhattan Corporation: The Making of America's Largest Bank *
In mid-August 1995, Walter Shipley, chairman and CEO of Chemical Banking Corporation, was preparing to leave the bank’s Manhattan headquarters building after a long day. For the past four weeks he and other senior Chemical managers had been in intensive negotiations with their counterparts at Chase Manhattan Corporation, including that bank’s chairman and CEO Thomas Labrecque. At issue was whether the two banks would agree to merge in a friendly transaction. If completed, the merger would produce the largest commercial bank in the United States, and the fourth largest bank in the world, with total assets of nearly $300 billion and over 74,000 employees. Shipley believed the merger would create value in two ways. First, it would allow the banks to realize substantial savings in operating and overhead costs. The banks’ businesses overlapped in many areas, and they both maintained extensive retail branch networks in the Downstate New York area. In addition, both banks were headquartered in Manhattan, and maintained elaborate trading floors in both Manhattan and London. Cost savings of up to $1.5 billion were deemed possible, but this would require reducing the banks’ combined workforce by 12,000 employees and closing over 100 branches. The second benefit of the merger, in Shipley’s view, was that as a larger bank with significant product and market leadership positions, Chemical-Chase would enjoy significantly higher revenue growth. Larger banks with leadership positions in each business could more easily enter new markets and develop new products; they could better satisfy the complex needs of large corporate customers; and they could better afford the large-scale investments in new technology that would be required to take a financial…...

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