The takeover of Bear Stearns by JPMorgan could put thousands of jobs at risk - on both sides of the deal.
The 14,000 employees of Bear Stearns may own a third of the company, but how many of them will keep their jobs is unknown as news of the firm's acquisition by JPMorgan sinks in. "People involved in the talks" suggested to the New York Times that a third of Bear's staff could find themselves out of work. On top of that, the newspaper notes, JPMorgan has already been considering cutting back, which could mean layoffs occurring within its ranks, as well.
Adding insult to injury, the $2-a-share price JPMorgan is paying puts Bear's value at just $236 million. On Friday, its stock was valued at $3.5 billion. In January 2007, it was worth $20 billion.
Who's likely to go - or stay? As one recruiter who works with Bear Stearns observes, neither JPMorgan nor the Federal Reserve yet knows how the combination is going to work. (The Fed put together a $30 billion credit line to facilitate the deal.)
"There's a big overlap in merchant banking," the recruiter told eFinancialCareers News. On the other hand, Bear's Measurerisk business - which offers risk measurement solutions to high end investors such as pension plans, endowments and hedge funds - is "unique and profitable."
The Wall Street Journal believes JPMorgan is "likely to integrate" Bear's prime brokerage and clearing businesses, along with some of its fixed-income and equity-trading operations. And while Bear's energy-trading and risk-arbitrage units could also be of interest, its investment bank probably isn't, the Journal says.
Unfortunately for its staff, Bear Stearns always had an "ownership culture," says Fox News - so much so it was seen as bad form for employees to sell their shares and annual bonuses often came as stock. All those holdings are now basically worthless, notes Fox. Indeed, former Chief Executive James E. Cayne, one of Bear Stearns' largest shareholders, will get just $13.4 million out of the deal, the New York Times says.
It's no surprise Bear Stearns employees are calling headhunters this morning. With the dust settling, "you just have to listen to what they have to say," the recruiter says.