Those in Bear Stearns' global clearing and prime brokerage operations, and high-producing brokers, seem safe after the purchase by JPMorgan.
For everyone else, the future is cloudy at best.
JPMorgan executives are struggling to head off broker defections while details of integrating the two firms get hammered out. According to media reports, Bear Stearns brokers who earned at least $500,000 in commissions and fees over the past year have been offered cash and stock worth as much as a full year's production. Brokers in the $250,000 to $500,000 income range reportedly were offered 50 percent of annual production. The offers include added incentive pay based on a broker's average commission growth in the next three years, according to a source cited by the Associated Press. However, some rivals are said to be offering far larger bonuses to Bear advisors who jump ship.
Meanwhile, JPMorgan reportedly plans to preserve Bear's global clearing and prime brokerage unit, which houses about 800 of Bear's 14,000 employees. The unit contributed one-fifth of Bear Stearns overall revenue in 2007, or $1.2 billion.
Those activities will survive because they complement, rather than overlap, the buyer's current operations, according to Wednesday's Wall Street Journal "Heard on the Street" column. JPMorgan lacks a prime brokerage unit - which provides financing and a smorgasbord of support services for hedge funds - and has long coveted one. And Bear's global clearing customers are mainly small broker-dealers, while JPMorgan's clearing business typically caters to larger customers, the Journal says.
Despite retention efforts and an unwritten industry code that frowns on raiding a rival in trouble, a pitched battle is being waged for Bear Stearns' top talent. Morgan Stanley reportedly hired a dozen senior producers from Bear's private client division. Merrill Lynch, UBS and Citigroup's Smith Barney wealth management unit dangled signing bonuses equal to two years' production, the New York Times reported, citing search consultant Mindy Diamond.
Internal lists with employee contact information are being hawked to recruiters on the Internet. Late last week someone tried to post a comment to an eFC story, offering a Bear Stearns employee directory for sale.
One rival reportedly standing back from the fray is Lehman Brothers. The WSJ reports that Lehman has barred individual divisions from hiring anyone out of Bear unless specifically approved by Lehman's human resources chief. "It isn't clear whether any senior hires have taken place at this point," the story says.