VAULT EMPLOYER PROFILE: MERRILL LYNCH

BY THE STAFF OF VAULT

© 2003 Vault Inc.

VAULT EMPLOYER PROFILE:

MERRILL LYNCH

Copyright © 2003 by Vault Inc. All rights reserved.

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ISBN 1–58131–274-1

Printed in the United States of America

INTRODUCTION 1

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1Merill Lynch at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

THE SCOOP 3

History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

ORGANIZATION 11

CEO’s Bio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Business Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13Key Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

VAULT NEWSWIRE 17

Recent Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

OUR SURVEY SAYS 27

GETTING HIRED 33

Hiring Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33Questions to Expect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36Questions to Ask . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38To Apply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

Table of Contents

Merrill Lynch

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Merrill Lynch

Table of Contents

ON THE JOB 39

Job Descriptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39A Day in the Life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40Career Path . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

FINAL ANALYSIS 43

RECOMMENDED READING 45

© 2003 Vault Inc.iv C A R E E RL I B R A R Y

Overview

Despite reducing headcount by nearly 30 percent in the past two years,Merrill Lynch is still among the largest of the investment banking bulgebracket firms. Merrill employs 48,300 people, second in headcount only tocompetitor Morgan Stanley. Merrill also has the largest sales forces on theStreet. The firm's global private client group boasts over 13,300 financialadvisors who together manage over $1.2 trillion in client assets, which isabout $600 billion more than Morgan Stanley and $350 billion more thanCharles Schwab. Merrill consists of three core business units: GlobalMarkets and Investment Banking (GMI), Merrill Lynch Investment Managers(MLIM), and Global Private Client (GPC).

Merrill's recent staff reductions, the most by far of any firm on the Street, arepart of a larger cost-cutting initiative headed by new chairman and chiefexecutive officer Stan O'Neal, whose goal is to streamline Merrill Lynch andreturn it to elite status. This goal hasn't been easy with the firm facing themarket fallout since the September 11 attacks and several regulatory suits.But if Merrill's 2002 financial results are any indication of how O'Neal isdoing, it would seem he has the firm on the right track. Earnings margins inthe investment banking and brokerage unit rose during the year. Overall, thefirm booked net earnings of $2.5 billion, a significant increase from the $573million reported in 2001. Merrill managed to record this boost while totalrevenues shrunk 15 percent in 2002.

Introduction

Merrill Lynch

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4 World Financial Center250 Vesey StreetNew York, NY 10080Phone: (212) 449-1000www.ml.com

DEPARTMENTS• Global Markets and Investment

Banking (GMI)• Global Private Client (GPC)• Merrill Lynch Investment

Managers (MLIM)

THE STATSChairman and CEO: E. StanleyO'NealEmployer Type: Public CompanyTicker Symbol: MER (NYSE)2002 Revenue: $28.25 billion2002 Net Income: $2.5 billionNo. of Employees: 48,300No. of Offices: Offices in 36countries

KEY COMPETITORSCitigroup's Global Corporate and

Investment BankCredit Suisse First BostonGoldman SachsJ.P. Morgan ChaseMorgan Stanley

UPPERS

• Good relations with superiors• Name recognition – everyone

knows the Bull• "Great deal flow and experience"

DOWNERS

• Tarnished image due to legaltroubles

• Greater visibility for retail businessand private wealth business,rather than investment banking

• Low morale as a result of layoffsand cost-cutting efforts

EMPLOYMENT CONTACT

All employment information,including how to apply, is availableat www.ml.com/careers.

• "Big is beautiful in this case"• "Always trying to get it right and

never able to get it together"• "They broke a great franchise"• "Reallocating and refocusing, but

not to be underestimated"• "Good brokerage, bad I-banking"• "Solid name, strong trading

program"• "Losing steam"• "Huge capabilities, arrogant, no

consistent culture"• "Good, but always behind"

THE BUZZWHAT EMPLOYEES AT OTHER FIRMS ARE SAYING

Merrill Lynch at a Glance

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http://www.ml.com

History

From humble beginnings to Wall Street player

Charles Merrill formed an eponymous underwriting firm in 1914; a year later,Merrill took on Edmund Lynch as his partner and the firm was renamedMerrill, Lynch & Co. Following the market crash in 1929, Merrill decided tofocus on investment banking and sold off its retail operations to brokeragefirm E.A. Pierce. A decade later, Merrill recaptured the retail business whenMerrill, Lynch & Co. merged with E.A. Pierce.

Charles Merrill, who ran Merrill Lynch until his death in 1956, was a trueRenaissance man. In addition to his activities in the financial world, hefounded Family Circle magazine (you've likely seen it at the grocery storecheckout line) and even played semi-pro baseball as a young man. Hequickly decided his fortune lay not in the hit-and-run, but in the sale andtrade. In 1971 Merrill Lynch became the second Big Board member to haveits shares listed on the New York Stock Exchange (the first was Donaldson,Lufkin & Jenrette, now a part of Credit Suisse First Boston). Later in 1971,the company unleashed its "Merrill Lynch is bullish on America" adcampaign. For better or worse, the firm has been linked to its bull mascotever since.

Bitter times, but better earnings

The year 2001 proved to be a difficult one for the bullish brokerage firm. Thefirm cut approximately 15,000 jobs, including 9,000 in the fourth quarteralone. The layoffs, along with other one-time expenses, led to the loss of$1.26 billion for the fourth quarter, the firm's first quarterly loss since 1998.But Merrill said the workforce cutbacks were part of a plan to slash costs by$1.4 billion a year and increase profitability.

Merrill did increase profitability in 2002, but not before recording a revenuedecrease and making significantly deeper cuts. A dry investment bankingclimate and a reduction in equity and mutual fund transactions due to a sourmarket meant lower revenues for everyone on the Street in 2002. For theyear, Merrill's global private client group booked $8.8 billion in revenue,down from $9.9 billion in 2001. The group did, though, boost pre-taxearnings to $1.3 billion from $918 billion (excluding charges resulting from

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the Sept. 11 attacks). The investment management unit counted $1.6 billionin revenue, down from $1.9 billion in 2001, but increased earnings to $321million from $302 million. And the firm's investment banking unit, whichhad revenue of $8.4 billion in 2002 after recording more than $10 billion in2001, managed to increase earnings to $2.4 billion from $2 billion.

Merrill ended the 2002 calendar year with about 6,000 fewer employees thanit began with. This didn't mean, though, that Merrill froze its recruitingefforts. According to the company, at least 5,500 new employees were hiredduring the year. Of these new Merrill-ites, about 400 were hired through thefirm's on-campus recruiting efforts. Nearly 60 percent of these on-campushires joined the firm's global markets and investment banking group, whileabout 35 percent joined Merrill's various support services units, includinghuman resources, technology and accounting and finance. That said,Merrill’s cost reduction plan extended into 2003. In a January 2003conference call with analysts, Merrill's executive vice chairman of financeand administration Thomas Patrick said staffing will "drift lower" in 2003.

Table tops

Part of the investment banking bulge bracket, Merrill Lynch is a globalpowerhouse. Almost all of Merrill's departments are at the top of theirrespective league tables or, at the very least, hover somewhere in or near thetop five. According to Thomson Financial, Merrill was the third-rankedunderwriter of global debt underwriting, the third-ranked equity and equity-related issuer in 2002 (the firm was second in 2001) and the sixth-rankedadviser on announced U.S. mergers and acquisitions during the year (downfrom third in 2001). In 2002 Merrill acted as lead manager on HeritageProperty Investment Trust's $450 million IPO and Petco Animal Supplies'$287.5 million IPO, among others. Also in 2002, Merrill co-lead managedThomson Corporation's $1 billion IPO, Platinum Underwriters' $740 millionIPO, Aeropostale's $225 million IPO and JetBlue Airways' $158 million IPO,among others. In 2002 Merrill advised on 195 M&A deals worth $172million, versus 253 worth $428 million in 2001, according to ThomsonFinancial.

For its work in 2001 and 2002, Merrill won several awards from variouspublications. In 2002 Euromoney named Merrill the "Best M&A House inNorth America" and the "Best Equities House" in the U.S., calling Merrill"the only firm that can boast long-term strength across the board in all areasof equities" and saying it "has the most balanced business on the Street."Honoring Merrill's merger and acquisition work, The Banker magazine


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named Merrill the M&A House of the Year. According to The Banker, whichdoled out the award in September 2002, Merrill was the "only investmentbank ranked in the top two in global, North America, Europe andinternational announced transactions in the past 12 months, advising on morethan half of these deals." In Institutional Investor magazine's annual "All-America" team survey, Merrill's equity research ranked No. 2 for 2002,jumping a notch from the spot it held in 2001. And for the fourth year in arow, Merrill picked up the top brokerage house of the year honors in 2002from SmartMoney.

Stan's the man

Then-Chairman and CEO David Komansky ended months of speculation inAugust 2001 when E. Stanley O'Neal was named president and chiefoperating officer – and Komansky's eventual successor. Observers thoughtO'Neal was a shoo-in as future CEO when he was named head of thebrokerage division in February 2000. But O'Neal's march to the top becamemore uncertain as time passed. The mystery was fueled by Komansky'sadmission in a CNBC interview in May 2001 that there were "at least three"possible successors under consideration.

While observers and insiders speculated on the fight for control of Merrill,O'Neal got down to business. As president and COO, O'Neal's first greatchallenge came in September 2001. The firm evacuated its headquarters inthe World Financial Center after the terrorist attacks of September 11, 2001.Three Merrill employees died in the attacks and some 9,000 workers weredisplaced. (Most were able to return to the World Financial Center, whichsustained only minor damage, within a few weeks.) O'Neal's leadershipimpressed many observers during the crisis. According to The Wall StreetJournal, O'Neal made key decisions such as splitting up the firm's seniormanagement immediately after the attack (reducing the possibility that thecompany would be incapacitated by the sudden loss of its leadership).

O'Neal also decided to restructure the management team shortly after theattacks, naming executives closer to him to positions such as chief legalcounsel and head of institutional securities – despite the fact that, accordingto an interview with the Journal, Komansky felt the firm needed a measureof stability after the trauma of the attack. O'Neal's biggest decision was totrim firm fat, cutting nearly $2 billion in costs.

In July 2002, Merrill's board quashed the rumors about alternative Komanskysuccessors, electing O'Neal to replace Komansky as Merrill CEO andchairman. As outlined by the board, O'Neal replaced Komansky as CEO in


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December 2002 and as chairman in April 2003, at which time O'Neal becamethe first African American to head a major Wall Street firm. (In the summerof 2002, Fortune called O'Neal the most powerful African-Americanbusinessman in the U.S.) Previously, Komansky said he would retire in 2004,but after Merrill reported strong second quarter earnings and Komanskysettled the firm's legal dispute with the New York Attorney General,Komansky thought it was time to step aside. According to The New YorkTimes, Komansky said he requested that Merrill's board support his earlyretirement because "Stan is clearly ready to take on the job." The board'sendorsement wasn't surprising. For the most part, O'Neal had been runningMerrill since he became the president in the fall of 2001.

End of an error

In what some saw as the final nail in the coffin of the New Economy, MerrillLynch's famed Internet analyst Henry Blodget announced his resignation inNovember 2001, accepting one of the lucrative buyout packages offered bythe firm in late 2001. Blodget rose to fame in November 1998 while at CIBCOppenheimer, predicting that Amazon's share price would reach $400. Theonline retailer was then selling for $240 per share but soon met Blodget'sambitious target. Blodget, along with his counterpart at Morgan Stanley,Mary Meeker, became stars of the New Economy. Conversely, theirreputations suffered when Internet stocks began plummeting in value in 2000and 2001. Blodget told The New York Times he would write a book about theInternet bubble, then seek work at a money management or hedge fund firm.

Not so fast, Hank

In April 2002, not long after Henry Blodget left Merrill, news surfaced thatthe former star analyst had been the focus of an investigation into Merrill'sresearch practices. The investigation, led by New York State AttorneyGeneral Eliot Spitzer, centered around phone calls and e-mails made by thefirm's Internet research group, which Blodget oversaw. Spitzer discoveredthat Merrill analysts had publicly hyped stocks, while privately they hadreferred to the same stocks as "junk" and "crap." (Merrill said the e-mailswere taken out of context.)

After tech stocks tanked, regulators began scrutinizing possible conflicts ofinterest between a firm's investment bankers and analysts, whose negativeresearch can hurt bankers' chances of obtaining advisory work. Spitzer'soffice obtained a court order forcing Merrill's research department to makeseveral changes, including disclosing to investors whether it has or intends to


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have an investment banking relationship with a corporate client, and addingin its reports how many buy-and-sell recommendations it has in a particularsector.

These changes, however, didn't end Spitzer's spat with Merrill. When Spitzerlater announced that he might bring criminal charges against Merrill, the firmretained former New York Mayor Rudy Giuliani to negotiate a settlementwith the state attorney general. Soon after Rudy became a Merrill consultant,the firm's CEO, David Komansky, publicly apologized for the firm'smalpractices. During Merrill's annual shareholder meeting in April 2002,Komansky called the internal e-mails that went public "very distressing anddisappointing," and said they fell "far short" of the firm's standards inresearch. Komansky also voiced plans to take "meaningful and significantactions to restore investor confidence." According to The Wall Street Journal,Spitzer called Komansky's remarks a step in the right direction, but he alsosaid they might not satisfy his requirement for an admission of wrongdoing.In May 2002, Merrill agreed to pay a $100 million fine to New York and otherstates to settle Spitzer's charges that the firm gave overly optimistic researchadvice in order to win advisory business.

Although Spitzer initially targeted Merrill, he later widened the investigationto include several other firms. In late April 2002, the SEC announced that ithad joined forces with Spitzer and had begun a "formal inquiry" into theresearch practices of Wall Street's top firms. At the close of the year, severalother of the largest U.S. investment banks were forced to pay millions infines, just like Merrill. Also at the end of 2002, the former Merrill starBlodget received some additional bad news: the NASD notified Blodget thathe would probably be facing fraud and other security violations in connectionwith his public support of companies that he knocked in e-mail messages.Blodget became the second analyst to be sued by the NASD. FormerSalomon Smith Barney analyst Jack Grubman was sued in September 2002for alleged research improprieties in connection with WinstarCommunications, a telecom that filed for bankruptcy protection in 2001. Inlate April 2003, the investigation into Blodget's dealings came to an end, withBlodget receiving the death sentence – he was barred for life from thebrokerage business and forced to pay $4 million in fines. Under theagreement with regulators, Blodget neither admitted nor denied wrongdoingin the matter.


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Negative energy

Several incidents were reported in 2002 linking Merrill to Enron – andpossibly to the bankrupt energy firm's shady dealings. According tocongressional investigations, in 1998 Merrill had replaced a research analystwho rated Enron "neutral" with an analyst who, soon after, upgraded therating. Allegedly, the upgrade was made in order to get more advisorybusiness from Enron, a claim that Merrill denies. Additionally, Merrill placedSchuyler Tilney, the firm's lead investment banker in dealings with Enron, onpaid leave after he pleaded the Fifth and refused to testify before a Senatecommittee examining deals between Merrill and Enron. Tilney's wife,Elizabeth A. Tilney, had close ties to Enron: She was a senior Enron executiveand a personal friend of the chairman, Kenneth L. Lay. In September 2002,Merrill fired Schuyler Tilney and vice chairman Thomas W. Davis after theyrefused to cooperate with the U.S. Justice Department and SEC's probe.

Also in September 2002, Allegheny Energy sued Merrill for $1 billion,alleging that the bank had inflated the value of the energy trading business itsold to Allegheny in 2001. The suit cited fraudulent transactions betweenMerrill and Enron as the cause behind the inflated price. Merrill denied thecharges and filed a countersuit against Allegheny. Both suits are still pending.Separately, in July 2002, the SEC began an investigation into Merrill's (andother banks') alleged shady value-inflating dealings with Enron. Thisinvestigation resulted in another big Merrill settlement. In February 2003,Merrill agreed to pay $80 million to settle charges that it helped Enronoverstate earnings. In agreeing to do so, Merrill became the first bank tosettle with the SEC in the matter. J.P. Morgan Chase and Citigroup, amongother firms, are also being investigated for their roles in overstating Enronearnings.

Merrill married to Martha mess

Merrill put two employees on paid administrative leave in June 2002, inconnection with allegations that homemaker guru Martha Stewart tradedshares of ImClone stock on inside information. Initially, the employees,Stewart's Merrill broker Peter Bacanovic and his assistant Douglas Faneuil,were not charged with any wrongdoing. However, a few months later, inOctober 2002, Faneuil pleaded guilty to a misdemeanor charge in connectionwith the federal investigation, as part of a deal to testify against Stewart andBacanovic. After the plea, Merrill fired both Faneuil and Bacanovic.

In June 2003, a federal grand jury in New York filed criminal charges againstStewart and Bacanovic. Stewart pleaded not guilty to securities fraud,


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conspiracy and making false statements to federal agents. Former Merrillbroker Bacanovic pleaded not guilty to charges of conspiracy, obstructingjustice and making false statements. The case against them is still pending.But the case against ImClone founder and former CEO Sam Waksal isn't.Waksal was found guilty of insider trading and is currently serving a seven-year prison term.

Upper turmoil

In late July 2003, Merrill's No.-2 executive Thomas Patrick was forced toretire after a disagreement with CEO Stan O'Neal over who would succeedthe chief executive. According to The Wall Street Journal, Patrick, the firm'sexecutive vice chairman of finance and administration and a 25-year Merrillveteran, was pushing for colleague and protégé Arshad Zakaria to be namedpresident and heir-apparent to O'Neal. (Zakaria was president of globalmarkets and investment banking at Merrill.) Journal sources said O'Neal"took a dim view of Mr. Patrick's efforts" and "believed it was too soon todesignate a No. 2 executive who could be considered an heir-apparent."(O'Neal took over the CEO post in December 2002 and the chairmanship inApril 2003.)

During a firm-wide broadcast two weeks prior to Patrick's forced retirement,O’Neal said he didn't want to put Merrill through another CEO successionbattle like the one that went on for two years to succeed his predecessor,David Komansky. O'Neal, the battle's victor, said it had been "destructive tothe organization because it fueled distracting internal rivalries."

O'Neal reportedly notified Patrick of his "sudden retirement" on the morningof July 29, 2003, one day after Merrill's board meeting, in which Patrick"made an impassioned speech in favor of Zakaria." Patrick was then escortedout of the building by security and, soon after, O'Neal announced that Patrickwould be retiring "effective immediately." No official reason was given forPatrick's retirement.

Another one gone

A week after Thomas Patrick's forced dismissal, Merrill Lynch announcedthat Arshad Zakaria would leave the firm at the end of 2003. The move cameas no surprise, even though Zakaria had just finished helping his unit to itssecond-best quarter ever, accounting for 55 percent of Merrill's total $5.3billion in revenue. Merrill also announced Zakaria's replacement, or rather,replacements. Taking over, effective immediately, as co-heads of Merrill's


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global markets and investment banking unit were Greg Fleming, co-head ofthe firm's financial institutions banking group, and Dow Kim, head of globaldebt markets. Zakaria will take the role as chairman of the unit until hisdeparture at the end of 2003.

Compensation

Pay

• First-year investment banking analyst: $55,000 base salary + $15,000 to$40,000 year-end bonus

• Second-year investment banking analyst: $65,000 base salary + $15,000 to$40,000 year-end bonus

• Entry-level financial advisor: $35,000 base + commissions

• Manager, investment processing (Fort Washington, PA): $65,700 + variablebonus

• Vice president, anonymous department (Jersey City, NJ): $104,000 base +$20,000 bonus

• Financial advisor (Stamford, CT): $75,000 base + $20,000 to $40,000bonus

• Assistant vice president, anonymous department (New York, NY): $73,000+ $13,000

Perks

• Cell phone

• Tuition reimbursement

• Employee discounts at local stores

• Occasional tickets to sporting events, shows

• Car service and meal allowance for working weekends or late on weekdays

• 401(k)


"Vacation time was three weeks, but no one was really allowed to useall that time."

– Merrill Lynch investment banking analyst

CEO's Bio

The groundbreaker

How does the son of an assembly-line worker become the head of a bulgebracket investment bank? Perseverance, hard work and a little practicaladvice from pops, of course.

Stan O'Neal, who became the first African American chief executive of amajor Wall Street firm in December 2002, says his father gave him the bestadvice he ever received. According to BusinessWeek, O'Neal's father toldyoung Stan, "Go to college. Forget being a writer. Pursue a more practicaljob." O'Neal's father knew what it meant to be practical. He supported afamily of four on less than $50 a week.

O'Neal took his father's advice and, alternating between working in a factoryand attending the General Motors-sponsored Kettering Institute in Detroit,received his BS in industrial administration. After receiving an MBA fromHarvard, O'Neal quickly rose from entry-level analyst to assistant treasurer atGeneral Motors (Today, O'Neal is a member of GM's board.). In 1986,O'Neal, then 35 years old, decided to switch gears. He became an investmentbanker because, according to O'Neal, "I thought investment bankers weresmart. But I didn't think they were five times smarter than me, which is aboutwhat they were making."

Less than three years after joining Merrill Lynch, O'Neal was named head ofthe firm's high-yield bond unit. Under O'Neal's leadership, the unit becamethe top junk bond division on the Street and stayed there until 1995, whenO'Neal was promoted to head of the entire Merrill Lynch capital marketsbusiness. O'Neal became the firm's CFO in 1998 and was promoted topresident of the U.S. private client group in 2000. As head of Merrill'sbrokerage division, O'Neal slashed headcount and shifted the unit's clientfocus away from the average Joe toward those individuals with at least $1million in assets. The unit prospered, and O'Neal was again promoted.

In July 2001, O'Neal became Merrill's president and chief operating officer.Since, then he's essentially been running Merrill's day-to-day operations. Inthe summer of 2002, Fortune called O'Neal the most powerful African-American businessman in the U.S. In December 2002, O'Neal succeeded

Organization

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Merrill Lynch

Organization

David Komansky as Merrill's CEO and took over as chairman five monthslater.

It remains to be seen how the relatively low-profile O'Neal, known for hiscalm demeanor, will handle the high-profile Merrill chairman and CEO posts.But those close to him have confidence in his continued success. MorganStanley banker Raymond McGuire, who used to work with O'Neal, says ofthe new Merrill leader, "The more pressured the situation, the cooler he gets."This cool should also help O'Neal outside the boardroom as well: He and hiswife are raising 11-year old twins, a boy and a girl.

Business UnitsMerrill Lynch consists of three main business units: Global Markets andInvestment Banking (GMI), Merrill Lynch Investment Managers (MLIM)and Global Private Client Group (GPC).

GMI comprises operations that fall under the auspices of investment banking,including underwriting and advisory. The investment management unitincludes, not surprisingly, investment and asset management businesses.GPC contains Merrill Lynch's conventional and online brokerages.

Pay close attention to what department – and what subgroup within thosedepartments – you're hired into. As one might expect of a giant organization,movement between departments at Merrill is problematic. Says one insider,"One thing Merrill does very badly is moving people from one group toanother. If you want to move to a different division, you need to work it outwith [the other division]. HR usually insists that you go through them, butthat slows everything down." That contact continues: "Every group is veryautonomous – every division is run as if it were a separate company. Ourdivision has quarterly 'town hall' meetings with 150 people, and whilesometimes someone says something about the overall financial health ofMerrill Lynch, it's basically like the division is its own separate company."

Global Markets and Investment Banking (GMI)

The Global Markets and Banking (GMI) consists of Merrill Lynch'sunderwriting, advisory and trading services, as well as the firm's research andventure capital activities. GMI, headquartered in New York, and withsignificant operations in London, employees approximately 10,900 peopleand banked net revenue of $8.4 billion in 2002, down from $10.3 billion in2001 and $12.8 billion in 2000.


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Merrill Lynch Investment Managers (MLIM)

Merrill Lynch's asset management group was rebranded Merrill LynchInvestment Management (MLIM) in 2000. It had previously consisted of twounits: Merrill Lynch Asset Management and Merrill Lynch Mercury AssetManagement. MLIM products are sold in the U.S. and abroad by MerrillLynch and through other sources. With 2,800 full-time employees, MLIMbanked $1.5 billion in net revenue for 2002, a hefty 24 percent decline from2001 net revenue of $1.9 billion. At the end of 2002, the unit had $462 billionin assets under management, another significant decline from its accountstatement in 2001, when it had $529 billion under management. MLIM isheadquartered in Princeton, N.J.

Global Private Client Group (GPC)

Merrill Lynch's Global Private Client Group (GPC), headquartered inPrinceton, NJ, with 670 offices worldwide, allows Merrill's individualcustomers access to the firm's brokers and research through commission-based accounts (usually best for small investors), asset-priced accounts(better for large investors) or online accounts. GPC was created in December2002, when Merrill combined its U.S. Private Client Group (USPC) and itsInternational Private Client Group (IPC). GPC brought in $8.8 billion in netrevenue in 2002, a decent drop from the $9.9 billion it recorded in 2001.Total assets in GPC accounts declined 16 percent during 2002 to $1.11 trillionfrom $1.29 trillion in 2001. At the end of 2002, GPC employed 31,900people worldwide, including 14,000 financial advisors. This is a quite a dropfrom its GPC payroll two years earlier, when the unit employed a total of46,100 people, including 20,200 financial advisors.

Locations

North American Institutional Locations

• New York, NY (Global HQ)

• Princeton, NJ (HQ, retail brokerage)

• Atlanta

• Boston

• Calgary

• Chicago


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Merrill Lynch

Organization

• Dallas

• Houston

• Los Angeles

• Montreal

• Puerto Rico

• San Francisco

• Toronto

• Vancouver

International Headquarters

• London, UK (Europe, Africa and the Middle East HQ)

• Tokyo, Japan (Japan HQ)

In addition to the U.S., the UK and Japan, Merrill has a presence in 34countries worldwide.

Key Officers Chairman and CEO: E. Stanley O'Neal

Senior Vice President and Head of Global Securities Research &Economics: Candace Browning

Senior Vice President and Head of Global Investment Banking, GlobalMarkets & Investment Banking: Samuel R. Chapin

Senior Vice President and Head of Global Technology & Services: JohnW. Cummings

Senior Vice President, Public Policy: Kevin Dolan

Senior Vice President and President and Chief Investment Officer ofMerrill Lynch Investment Managers: Robert C. Doll

Senior Vice President and Co-Head of Global Equity Markets, GlobalMarkets & Investment Banking: Jeffrey N. Edwards

Senior Vice President and Co-Head of Global Equity Markets, GlobalMarkets & Investment Banking: Sergio Ermotti

Executive Vice President and Chief Financial Officer: Ahmass L. Fakhany


Merrill Lynch

Organization

Senior Vice President and Chief Operating Officer of Global PrivateClient: H. McIntyre Gardner

Executive Vice President and President of Global Private Client: James P.Gorman

OwnershipMerrill Lynch is a publicly traded company with the trading symbol MER.The firm is listed on the New York Stock Exchange, Chicago StockExchange, Pacific Exchange, Paris Bourse, London Stock Exchange andTokyo Stock Exchange. Merrill's employees own about 30 percent of thecompany's stock.


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August 2003: Another top executive as good asgone

In an expected announcement, Merrill Lynch says head of global markets andinvestment banking Arshad Zakaria will leave the firm at the end of 2003.The announcement comes a week after Thomas Patrick, Merrill's formerexecutive vice chairman of finance and administration, was forced to retireafter pushing for protégé Zakaria to be named Merrill president, a move CEOStan O'Neal was strongly against.

July 2003: Merrill's No. 2 is history

Thomas Patrick, Merrill Lynch's executive vice chairman of finance andadministration, is forced to retire after a disagreement with CEO Stan O'Nealover who will succeed the chief executive. Patrick, a 25-year veteran ofMerrill and the firm's second-ranking executive, was pushing for protégéArshad Zakaria to be named president and heir-apparent to O'Neal. But,according to The Wall Street Journal, O'Neal "took a dim view of Mr.Patrick's efforts" and "believed it was too soon to designate a No. 2 executivewho could be considered an heir-apparent."

In June 2003: Martha and ex-Merrill brokercharged

A federal grand jury in New York files criminal charges against MarthaStewart and former Merrill broker Peter Bacanovic in connection with aninsider trading investigation. Stewart pleads not guilty to securities fraud,conspiracy and making false statements to federal agents. Former Merrillbroker Bacanovic pleads not guilty to charges of conspiracy, obstructingjustice and making false statements.

April 2003: Bye-bye Blodget

Former Merrill superstar research analyst Henry Blodget is barred for lifefrom the brokerage business and forced to pay $4 million in fines by theNASD for publicly supporting companies that he knocked in e-mailmessages. Blodget oversaw Merrill's Internet research group, which was thecenter and jumping-off point for New York State Attorney General EliotSpitzer's year-long investigation into Wall Street's research practices.Blodget neither admitted nor denied wrongdoing in the matter.

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February 2003: Merrill settles Enron probe

Merrill Lynch agrees to pay $80 million to settle charges it helped Enronoverstate earnings. In agreeing to do so, Merrill becomes the first bank tosettle with the SEC over Enron-related wrongdoings.

December 2002: Stan takes over

Stan O'Neal succeeds David Komansky as Merrill's CEO, becoming the firstAfrican American to head a major Wall Street firm.

October 2002: Cutting a deal with the SEC

Ex-Merrill assistant broker Douglas Faneuil pleads guilty to a misdemeanorcharge in connection with the federal investigation into whether homemakingguru Martha Stewart traded ImClone shares on inside information. Faneuil'sguilty plea is part of a deal to testify against Stewart and former Merrillbroker Peter Bacanovic.

September 2002: Merrill sued, thencountersues

Allegheny Energy files a civil suit against Merrill Lynch for $1 billion,alleging that the bank had inflated the value of the energy trading business itsold to Allegheny in 2001. Allegheny claims that fraudulent transactionsbetween Merrill and Enron were the cause of the inflated price. Merrilldenies the charges and files a countersuit. The cases are still pending.

September 2002: Merrill boots two in Enrondebacle

Merrill Lynch fires Schuyler Tilney, its lead investment banker in dealingswith Enron, and vice chairman Thomas W. Davis after they refuses tocooperate with the U.S. Justice Department and SEC's probe in connectionwith the firm's involvement in Enron's overstatement of earnings. Previously,Merrill had placed Tilney, whose wife was a former senior Enron executiveand a personal friend of the Enron chairman Kenneth L. Lay, on paid leave.

July 2002: Merrill married to Enron mess?

Two separate incidents are reported linking Merrill to Enron - and possibly tothe bankrupt energy firm's shady dealings. According to Congressionalinvestigations, in 1988 Merrill had replaced a research analyst who rated


Merrill Lynch

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Enron "neutral" with an analyst who upgraded the rating. Some allege therating was changed in order to get more advisory business from Enron, aclaim that Merrill denies. Additionally, Merrill placed Andrew S. Fastow,Merrill's lead investment banker with dealings with Enron, on paid leave afterhe invoked his Fifth Amendment right to not testify before a Senatecommittee examining deals between Merrill and Enron. Fastow's wife,Elizabeth A. Tilney, had close (very close) ties to Enron: she was a seniorEnron executive and a personal friend of the chairman, Kenneth L. Lay.

July 2002: It's official: O'Neal in, Komansky out

As expected, Merrill's board electes E. Stanley O'Neal to replace DavidKomansky as Merrill CEO and chairman. But in an unexpected move, theboard says O'Neal will replace Komansky as CEO in December 2002 and aschairman in April 2003. Previously, Komansky indicated he would retire in2004, but after Merrill reported strong second quarter earnings andKomansky settled the firm's legal dispute with the New York AttorneyGeneral, Komansky decided it was time to step aside.

July 2002: Overseas overhaul

Merrill sacks about 25 equity traders and sales staff members in Europe,representing about 5 percent of the firm's European equity group. The layoffscome on the heels of a decision by senior equity managers to focus onMerrill's largest trading clients. According to company insiders, additionallayoffs are expected. Nearly 25 percent of Merrill's 450 European investmentbankers could soon lose their jobs as well.

June 2002: Merrill in the middle of Marthamess

Merrill puts two employees on paid administrative leave in connection withallegations that homemaker guru Martha Stewart traded shares of ImClonestock on inside information. The employees, Stewart's Merrill broker PeterBacanovic and his assistant, are not charged with any wrongdoing.

May 2002: Merrill settles with Spitzer

Merrill agreed to pay a $100 million fine to New York and other states tosettle New York State Attorney General Eliot Spitzer's charges that Merrill'sresearch department issued overly optimistic research in order to winadvisory business.


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April 2002: Star analyst named in state probe

Former Merrill Lynch research analyst Henry Blodget is named as the focusof an investigation into Merrill's research practices. The investigation, led byNew York State Attorney General Eliot Spitzer, centers around phone callsand e-mails made by the firm's Internet research group, which Blodgetoversaw. Spitzer discovers that Merrill analysts had publicly hyped stocks,while privately they had referred to the same stocks as "junk" and "crap." Asa result of the investigation, Merrill makes several changes to the way itsanalysts issue stock ratings on corporate clients, and agrees to pay a $100million fine to New York and other states to settle charges that it providedoverly optimistic research to win investment-banking business.

January 2002: Merrill details full scope of cost,job cuts

Merrill Lynch announces that it will take a $2.2 billion charge againstearnings for the fourth quarter of 2001 to pay for a massive restructuring. Thefirm cuts 9,000 jobs in the fourth quarter a total of 15,000 for the entire yearand announces the closing of 20 branches and the elimination of 1,200 jobsin Japan. Merrill began investing heavily in Japan in 1998, but never saw thatinvestment pay off.

November 2001: The end of the Interneteconomy

Henry Blodget, Merrill Lynch's Internet equity analyst and a symbol of theInternet mania of the late 1990s, leaves the firm after accepting a buyoutpackage. Blodget became famous in November 1998 when he (correctly)predicted that Amazon.com's share price would exceed $400. Blodget sayshe is writing a book about the Internet economy and would then seek work ata money management firm or a hedge fund.

September 2001: New faces at the top

The firm announces two management changes on September 20, 2001.James Gorman is named president of the firm's U.S. Private Client Group,taking over for Stanley O'Neal, who was promoted to president and COO atMerrill Lynch a month earlier. Also getting new business cards is TerryKassel who’s named senior vice president, human resources. Kassel, aformer partner at consulting firm McKinsey & Co., joined Merrill in 1999 aschief marketing officer.


Merrill Lynch

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September 2001: Merrill hit by World TradeCenter attack

In terms of damage to infrastructure, Merrill Lynch is one of the companieshardest hit by the terrorist attacks that destroyed the World Trade Center.Three Merrill employees were killed in the attack; some 9,000 employees inthe vicinity were displaced. The company quickly relocates most of the thoseemployees to alternate sites in New Jersey, though the change may be onlytemporary. CEO David Komansky tells BusinessWeek the firm "willreoccupy our buildings" once the financial center is rebuilt.

August 2001: O'Neal named president and COO

E. Stanley O'Neal, the head of Merrill's brokerage division and its formerCFO, is named president and chief operating officer. O'Neal's promotion putshim in line to become CEO at Merrill when David Komansky retires in 2004.O'Neal will be the first African-American head of a major Wall Street firm.

July 2001: Stock analysts face restrictions

Responding to pressure placed on the industry regarding the objectivity ofequity analysts' opinions, Merrill Lynch announces its stock analysts will beprohibited from owning any of the stocks they covered.

April 2001: Merrill cuts 1,000

In a cost-cutting move the firm eliminates 1,000 jobs, including 200investment bankers.

November 2000: New hires beef up MerrillM&A

Merrill Lynch lures back Richard Johnson, who left the firm in 1998 to joinTyco International. Johnson returnes to his previous post as vice chairman ofM&A. The firm also hire George Bilicic, a partner at prestigious law firmCravath, Swaine & Moore, as a managing director in M&A.


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July 2000: Merrill moves into sportsmanagement business

The firm buys a 50 percent stake in the financial services division of IMG, aninternational sports management and marketing firm based in Cleveland.

April 2000: Merrill partners with HSBC

Merrill and London-based HSBC Holdings create an online venture thatwould offer banking and brokerage services to individuals outside the U.S.

March 2000: Merrill offers pay guarantees tosenior bankers

The Daily Deal reports that, in the wake of high-level departures such as JackLevy, Merrill is offering substantial packages to entice people to stay.

March 2000: Merrill's head of M&A leaves thefirm

Jack Levy jumps ship to become co-chairman and co-head of global M&A atGoldman Sachs. Daniel Dickson and Steven Barnoff are picked to replaceLevy.

February 2000: Merrill announces plans to offerinterest-bearing brokerage accounts

Customer funds not invested in securities will be swept into CashManagement Accounts (CMA) managed by two Merrill-owned commercialbanks. The Federal Deposit Insurance Corporation expresses reservations,saying that if other brokerages follow Merrill's lead, they would overtax thesystem by creating too much insured money.

January 2000: Merrill announces record year

Merrill announces a record year in earnings for 1999. The firm retaines itsNo.-1 spot among underwriters of all common debt and equity. It slips to No.3 (from the second position) on the rankings of M&A advisors, but increasesmarket share significantly.

Select Recent Transactions


Merrill Lynch

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August 2003

• Merrill Lynch co-managed Citadel Broadcasting's $418 million IPO.

July 2003

• Merrill Lynch and CSFB co-lead manages Sallie Mae's $2.03 billion debtoffering.

• Merrill Lynch and Goldman Sachs co-lead manages Commonwealth Bankof Australia's $550 million offering of perpetual trust preferred securities.

• Merrill Lynch and Citigroup co-lead manages Consolidated Edison's $200million debt offering.

• Merrill Lynch, along with Citigroup and J.P. Morgan Chase, co-leadmanages First Data Corp.'s $1 billion note offering.

• Merrill Lynch and Goldman Sachs co-lead manages UFJ Finance Aruba's$1.25 billion subordinated debt offering.

• Merrill Lynch co-lead Newcastle Investment Corp's $81.4 millionsecondary stock offering.

June 2003

• Merrill Lynch, along with Citigroup and Morgan Stanley, co-leads GeneralMotors' $5.25 billion debt offering.

• Merrill Lynch and Deutsche Banks co-lead Overseas Bank's $1 billion debtoffering.

• Merrill Lynch co-lead manages Xerox's $1.25 billion debt offering.

• Merrill Lynch, along with Citigroup and Goldman Sachs, co-leads ChubbCorp.'s $400 million convertible bonds offering.

• Merrill Lynch, with UBS and Deutsche Bank, co-leads Fannie Mae's $2billion debt offering.

May 2003

• Merrill Lynch and Goldman Sachs co-lead manage Allstate Corp.'s $400million debt offering.

• Merrill Lynch lead Corporate High Yield VI Inc.'s $480 million equityoffering.


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• Merrill Lynch, with Bear Stearns and Deutsche Bank, co-leads FederalHome Loan Bank's $3 billion debt offering.

• Merrill Lynch, with Morgan Stanley and J.P. Morgan Chase, co-leadmanaged SLM Corp.'s $2 billion convertible note offering.

• Merrill Lynch, with Citigroup and Lehman Brothers, co-leads manageLiberty Media's $1 billion note offering.

• Merrill Lynch lead manage Advent Claymore Fund's $520 million initialpublic offering.

April 2003

• Merrill Lynch lead manage Target's $200 million debt offering.

• Merrill Lynch and Banc of America Securities co-lead Federal Farm CreditBanks' $1 billion debt offering.

• Merrill Lynch and CSFB co-lead Energy Partners Ltd.'s $64.6 millionsecondary equity offering.

• Merrill Lynch, with Goldman Sachs and Lehman Brothers, co-lead manageFannie Mae's $1.5 billion subordinated bond offering.

• Merrill Lynch and J.P. Morgan Chase co-lead ING Bank's $1 billionsubordinated debt offering.

March 2003

• Merrill Lynch, with CSFB and Goldman Sachs, co-leads Fannie Mae's $6billion debt offering.

• Merrill Lynch, with J.P. Morgan Chase and Morgan Stanley, co-leadsComcast's $1.5 billion debt offering.

• Merrill Lynch and UBS Warburg co-lead manage Nestle Holdings' $200million bond offering.

• Merrill Lynch and Dresdner Kleinwort Wasserstein co-lead manage GECapital's 1 billion euro debt offering.

February 2003

• Merrill Lynch, with ABN AMRO and First Tennessee, co-leads FreddieMac's $2 billion debt offering.


Merrill Lynch

Vault Newswire

• Merrill Lynch, with Bear Stearns and UBS Warburg, co-lead Fannie Mae's$2 billion debt offering.

• Merrill Lynch lead manage GE Capital's $750 million debt offering.

• Merrill Lynch lead National Fuel Gas's $250 million debt offering.

• Merrill Lynch and Credit Suisse First Boston co-lead Infinity Property &Casualty's $198.4 million IPO.

• Merrill Lynch lead Timken's $163.9 million secondary equity offering.

January 2003

• Merrill Lynch, with Morgan Stanley, co-leads Household Finance's $300million senior debt offering.

• Merrill Lynch lead manage Hecla Mining's $93.5 million secondary equityoffering.

• Merrill Lynch, with Lehman Brothers and Deutsche Bank, co-leadsInternational Lease Finance's $230 million debt offering.

• Merrill Lynch, with Deutsche Bank and UBS Warburg, co-leads FannieMae's $4 billion debt offering.

• Merrill Lynch, with J.P. Morgan Chase and Morgan Stanley, co-leadsComcast's $1.5 billion debt offering.


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Attention, M-Lynch employees

The culture is "relaxed, but now it's all about cost savings," says one banker."Everything you do should be about cost savings." The firm's cost-cuttingefforts have certainly affected morale. "My department head is extremelyfocused on cutting costs, almost to the detriment of anything else," explainsan insider. Another disgruntled contact says, "Merrill will do anything toreduce costs – even things that are not particularly well thought through." Forexample, this source says Merrill has failed to make the salaries of associatespromoted from within (from analyst positions) equal to salaries of associateshired out of business school. "Such practices foster a tremendous sense ofbad will," the contact says, "and cause us to lose very productive juniorbankers. For the limited money we save, it's not worth it."

Despite the tightening budgets, insiders, for the most part, agree the people atMerrill have their feet firmly planted on the ground. "They're driven butdown to earth, and more collegiate than competitive," says one contact, whoadds, "People are extremely deal- and client-focused, and relationshipbuilding is important – you won't advance here by screwing others." Onebanker adds that insiders are "proud to be part of Merrill Lynch, but not headyabout it."

Indeed, Merrill has a reputation for a gentler culture than its competitors. Onebanker says, "We're different from other places. The people are nicer than atother banks." That doesn't mean things can't get dicey. "While the overallculture at Merrill Lynch is much more collegial than at most Wall Streetfirms, investment banking, and M&A in particular, suffer from the same sharpelbows that afflicts all of the Street," says one banker. "For example," saysanother, "M&A has a very different culture than many of the industry groupsin investment banking. M&A bankers consider themselves to be the 'Marines'of investment banking and will go to extraordinary lengths to serve theirclients."

Getting some

The firm's junior bankers report a fair amount of respect from their moresenior colleagues. "I have received tremendous sponsorship from mymanagers," offers one pleased source, "which has been my greatest source ofsatisfaction here." This contact does admit, though, that while her "managersare great, overall, I am not particularly in love with Merrill Lynch." Another

Our Survey Says

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insider also has some good things to say about the big bosses. "Directors andvice presidents work associates hard, but managing directors ensure propercare and feeding of the associates," says one contact. Another says his bossestreat him as well as any associate in investment banking – which admittedly,isn't always a love fest. "While investment banking is billed as a meritocracy,one's title and tenure is still extremely important in terms of getting respectfrom senior bankers – there is a bias that junior bankers don't have much toadd to a discussion that is valuable," gripes that insider. "Generally, I foundsenior bankers to be disinterested at best and condescending and verballyabusive at worst. Investment banking is simply not a culture where anyonesays, 'Please,' 'Thank you' or 'Good work.'"

The web of bureaucracy, the battles within

A major drawback of working for a bank the size of Merrill, most agree, isthe "horrendous" bureaucracy, which "can sometimes combine with officepolitics to make life miserable and incomprehensible." One source says,"While I'm in the world outside, I'm proud to be working for Merrill. But onthe inside, I know that bureaucracy and politics can make life prettymiserable." An investment banker, who agrees that bureaucracy is rampant,also complains about the "lack of coordination between groups," and says thefirm is "managed more towards other businesses than investment banking."

Some groups might have it better than others. A private client insider says,"Yes, there's some bureaucracy, but it's very entrepreneurial. It's very muchlike running your own business with the backing of a huge firm." One sourcewho thinks the bureaucracy can be circumvented admits, "Merrill Lynch runsrelatively flat in terms of day-to-day decision-making, but tends to get boggeddown in large-scale company-wide initiatives. In other words, if a decisionneeds to be made quickly to take on a new client or hire a high-profile banker,senior bankers have a lot of latitude to do so."

Another insider, though, says battles occurrs not only "between departmentsthat worked together, but also with different locations within the samedepartment." The contact, who calls the "sales force the ruling faction of thefirm," does admit, "For the most part, professionalism was preached toeveryone, [so] pettiness was not projected to the client – not too much."

The long and shorter of it

It comes as no surprise that investment banking analysts and associates at thebulge bracket Merrill Lynch clock some serious OT. In your first two years


Merrill Lynch

Our Survey Says

at Merrill, "expect the worst. If you can't cope with 70 or 80 hours a week,you're not going to make it. Even after that, you'll be working about 60 to 70hours a week. Plus, at least one day a weekend, you're sure to be in theoffice." Another employee says, "Working during your first two years atMerrill is not like cramming for two nights before an exam. It's a hundredtimes worse. The bottom line is that whatever happens, you have to get thejob done. If that means three all-nighters in a row, so be it." As with mostinvestment banks, "the hours of an analyst are the worst." But it's not as ifassociates aren't working hard, too. One junior associate reports workingabout 100 hours a week, and regularly working both days on the weekends.

So be thankful when you reach VP status. "My hours have improvedconsiderably in the last several months since my promotion to vicepresident," says a former I-banking associate who now reports working 60 to70 hours a week. "I used to frequently work weekends, but now it is just asneeded, which tends to be once a month or less, and is much moremanageable when required."

Of course, not all positions at Merrill Lynch require the time commitment thatthose in investment banking do. You can find other opportunities at Merrillthat, while challenging, offer a more desirable work/life balance. Forexample, one insider, a senior programmer, reports having to put in little, ifany, face time. "My direct manager doesn't watch the clock. As long as thework gets done on time and correctly, she doesn't worry about when you getin or leave the office." The contact adds, "Telecommuting is not a problem,and can be arranged upon request." Even so, explains the source, "my groupsupports groups in Asia-Pacific, Europe and the U.S. As a result, we areexpected to be available 24-7 in case of catastrophic failure or outage.Thankfully, these events are very rare."

The skinny on comp

While the firm pays employees around the industry average, insiderscomplain Merrill is slow to match competitors' increases. Gripes one banker,"[The firm] doesn't ask, 'How much do we have to pay to get people to stay?'but 'How little do we have to pay people to get them to stay?' They look atMorgan Stanley and Goldman Sachs and then price at the lowest." Anotherinsider calls comp not up to par with other broker-dealer firms," but concedesthat's "the only downside" of working at Merrill. And a former banker says,"Whether it was compensation or benefits, Merrill always seemed to betaking short-cuts."


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In general, though, "the firm works hard to be fair and is successful," says oneassociate. An I-banking VP explains, "I have been at or close to the top ofthe pay range every year since I have been here; however, my pay hasdeclined for the last two years consecutively." This source adds, "If I wereto receive less than a $200,000 bonus this year, I would be hard pressed tostay."

Global private client employees are more pleased. One employee in thatbusiness group notes that his base salary is more than 10 percent than offershe received from several competitors. One long-time Merrill-ite explainshow things have changed lately. "When I first started here [in 1997], folkswho were just 'putting in time' felt very comfortable. But with Stan O'Nealtaking over, that feeling is gone. Most of the those folks just cashing a checkuntil retirement have left – many involuntarily – and those of us who remainare being asked to put forth considerably more effort and take on moreresponsibility." Is this good? "This is a very good thing," the contact says,"and I believe it will make the company stronger in the long run."

The extras

Perks at Merrill, according to employees, are "the same as those you get atother banks." Among the firm's offerings, says one contact, are "401(k), lifeinsurance and corporate gym discounts." Of course, bankers also get theusual free transportation home and dinner if they work late. The firm's dinnerplan utilizes restaurants with which Merrill has negotiated discounts. Someinsiders say they get sick of the food, "but a lot of the associates love it."Those who work on Saturday or Sundays get three meals covered. And thefirm still has a business casual dress code, except for client contact.

Training you can keep, prestige you can take

With respect to opportunities for advancement, insiders say Merrill "shines."Explains one insider, " If you have the opportunity to make it in to the Merrillworld, you have a vast array of options – Merrill hires from within. They alsohave an extensive training facility and syllabus." The contact adds, "Internaltraining courses help the employee perfect his or her position, and leadershipprograms set the employee up for advancement." Another employee pointsto the firm's "mobility and advancement program, which seems prettycomprehensive and allows employees to make contact with other hiringmanagers in an informal sense, before requiring them to alert their currentmanager of an 'intent to interview' with another group."


Merrill Lynch

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Private client employees seem especially pleased. "Opportunities foradvancement were strong," says a former GPC insider. "You control yourdestiny. You get out of it what you put into it." Another private clientemployee calls Merrill a "meritocracy" and agrees advancement is "totally upto you." One employee reports a different Merrill, at least in Chicago "Theamount of politics, especially in the Chicago office, was disgusting andsomewhat shocking, given the size of the office," says a former investmentbanking analyst. "People were not rewarded for their merits whatsoever.Despite the lack of tech work at the time, every analyst in the tech group gota top bonus in 2001 because the person handling the process was a director inthe technology group."

Employees definitely seem to benefit from Merrill's high profile. One formerassociate notes, "When I left the firm, I found it easy to get a job wherever Iwanted to on Wall Street – even though I took two years off after leavingMerrill and did nothing. When I sent in my resume to various places, theysaw the Merrill name and pounced on me." Another insider says, "Even moreimportant than the resume value after you leave the company is the fact thatMerrill, because of its name and reputation, is able to obtain major businessthat smaller places would not gain. So, while working at Merrill, you areexposed to clients who are in the top ranks of important companies that youmight want to work for some day."


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Competition on the Street – and beyond – is heating up. Withthe finance job market tightening, you need to be your best.

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Hiring Process

Tough room

"It's a tough market this year, so you have to be really top-notch to get in,"says a current Merrill banker. "You have to have proven work experience –with results." Indeed, landing a job at Merrill isn't what is used to be. It usedto be difficult, but now, say many, it's very difficult, especially since the firmhas significantly cut back on hiring. "The overall markets dictate whether it'sextremely difficult or nearly impossible to get into Merrill Lynch," reportsone associate. "The work is difficult, the hours are long and the lifestyle istough, but many, many people want to work for Merrill Lynch. Competitionis tough and it only gets tougher to move up within the firm." Another contactechoes that assessment, citing the current market slump. "Merrill Lynch hasbecome extremely selective in this market downturn," says that source.

However, there are some inside Merrill who say it's not that hard to get by theBull. "I think it should be more difficult than it is to get a job," explains onecontact. "We have a tendency to backfill when we don't identify enoughcandidates, and I generally don't think it's a good idea to work towards aspecific number of hires; rather, we should hire only the people we believeare a 'yes.'" Even so, others say that getting a summer internship with Merrillmight be your only hope of landing a full-time gig with the firm. Merrill doesits "hiring mainly through the summer program," says a current banker,adding, "We do very limited recruiting outside of the summer program thesedays, given current headcount limitations."

Where you need to be, who you need to know

Insiders say the firm concentrates on finding MBA recruits at Wharton,Harvard, Chicago and Columbia, and primarily recruits undergrads out ofPrinceton, Cornell, Penn State, NYU, Howard and Penn (Wharton). Ofcourse, other schools are represented as well. "Merrill Lynch InvestmentBanking has a target roster of schools numbering in the dozens," reports oneinsider. If you're not from one of these schools, and don't happen to know abigwig, getting attention from recruiting is tough." Indeed, knowing peopleat the top helps. "Nepotism is rampant," says one contact, "with folks pullingstrings to get their children, cousins and friends jobs. It can be a good thing

Getting Hired

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if the folks they bring in are quality employees, but sometimes it results indead wood being added to the company."

Bigwigs aren't the only ones with influence. "Resume books with hundredsof resumes – Penn has over 400 – are handed out to analysts to combthrough," explains an insider. "Our selections, mostly people we know, witha few others who we're in some other way impressed by, are then given first-round interviews. From there, it's all about who you meet and how you do."

Typically, the first and possibly the second round of interviews are held on theapplicant's campus. Those candidates who make the cut are invited to furtherrounds at the New York or New Jersey offices. Certain groups such asinvestment banking typically hold two rounds on campus before final - roundinterviews, while other groups such as investment management usually onlyhold one round on campus before final interviews. One private client insiderreports going through "three rounds of interviews, with two tests beforeinterviewing started – one personality [interview] and one financial." In thefirst round, the contact met with "the GPC VP and another VP from a differentbranch." In the second round, with "an assistant VP and a senior financialadvisor" and in the third, with "a panel of four people." If that seems like alot to handle, don't worry. The contact says, "The interviewing gets easieronce you get past the first interview."

Make sure you're at your most charming at cocktail parties, lunches and otherinformal Merrill gatherings. "Each social outing prior to interviews is veryimportant in determining who makes the closed list," reports one insider. Thesummer hiring process, says one source, generally consists of two rounds ofone interview each – two people in each interview, with both interviews oncampus."

Be ready. Be very, very ready.

"Interviews vary a lot," says a Merrill insider. "They tend to attack whateverpart of your background is weakest." The source also says beware of theshort interview: "Have questions ready, since they might end an interviewearly and give you a lot of time for your questions." Another banker sayspreparation is key: "Do your homework," says the contact. "Know theposition you're interviewing for and bring concrete evidence of experienceand results that could be translated into success in the new role."

Of course, interview questions will vary by department. An investmentbanker says his interviews, at least the later rounds, "were relatively informal.They generally wanted to know about my character – if I was team driven and


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Getting Hired

whether I was dedicated to both the work product and the process." Even so,Merrill doesn't shy away from technical questions. "I went through thetypical full-time hiring process at business school," reports one associate."With an investment banking internship under my belt, I did the standard on-campus interview, followed by a group-specific interview [with] five people,followed by an office-specific interview with another five people. Thequestions were based primarily on my summer experience – I was asked todescribe the deals I worked on, the strategic rationale and the valuationmethodologies used."

An insider in retail sales says the global private client group will want you toanswer the following: "Can you do the job, physically and mentally? Why doyou want to do the job, and what will you do when the going gets tough? Andhow exactly will you do the job?" The contact says the last question is the"key part if you have to develop a practice." Another source in sales reportsa more intense interview process. "I went on a two-day interview toPrinceton, N.J. After that, I interviewed with two people, my immediatesupervisor and the district supervisor. Questions included asking me how Iwas a leader, and how I intended to find new business." The contact adds, "Iwas also asked to take a couple of tests."

A technology employee reports that after a first-round interview on campus,he met with four different Merrill employees in four separate interviews. Saysthe contact, "Each concentrated on a different aspect of my resume andexperience: behavioral, technology experience, other work and collegeexperience, and a potpourri." A recent summer hire says he had a relativelyunorthodox couple of interviews. "I think both interviews are supposed to beon site, however, I was living in another state at the time so I had one over thephone." The source interviewed with one of the regional directors andremembers two "specific questions that really threw me off: 'What is yourmost embarrassing moment?' And, 'If you could pick two people to take withyou in a drive across country, who would you pick?'" According to thecontact, "I'm not really sure what they are looking for with these questions,but I must have answered them okay – because I got the internship."

Supporting roles

Merrill actively hires new employees in its support services units, whichinclude operations and services, technology, and accounting and finance. Intechnology, recruits join Merrill in its Technology Leadership Program(TLP). In accounting and finance, recruits join the firm's Accounting andFinance Analyst Program (not to be confused with Merrill's Investment


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Banking Analyst Program). In general, both the TLP and the Accounting andFinance Analyst Program only accept undergrads right out of school.According to Merrill, its Accounting and Finance Analyst Program competesfor recruits with the Big Four accounting firms, GE's Financial ManagementProgram and J.P. Morgan's Internal Consulting Services program, amongothers.

Questions to Expect1. Why are you interested in investment banking?If you have no previous experience on Wall Street, you are guaranteed to getthis question. The primary purpose of this question is to weed out those whoare interested in banking solely for the money. Even if that is your primaryinterest, you'd better have a better answer planned. Try discussing your long-held love of finance, how you have followed the markets for years and findthem fascinating, or how you love the idea of combining your love ofnumbers with your entrepreneurial drive in order to win business for the firm.

If you don't have a banking background, also be prepared to talk about thelong hours you will be expected to work. Most candidates, of course, aresomewhat informed, though they may not know whether to believe therumors. "They all want to know about the hours," says one interviewer atMerrill. Whatever you feel about working 100-hour weeks, don't lie and sayyou can't wait to get to it. Says one Merrill insider: "If someone lookedenthusiastic about the hours, that would be weird."

2. Walk me through the major line items on a cash flow statement.First, the Beginning Cash Balance, then Cash from Operations, then Cashfrom Investing Activities, then Cash from Financing Activities, then theEnding Cash Balance.

3. What is the link between the balance sheet and the income statement?The main link between the two statements is that profits generated in theincome statement get added to shareholder's equity on the balance sheet asretained earnings.

4. Why Merrill?Get ready to answer this question. Understand that Merrill is strong invirtually every business, is a huge, prestigious firm with a reputation forbeing less blue-blooded than chief competitors Goldman and Morgan Stanley,and is expanding aggressively (especially in asset management) overseas.Now figure out why that appeals to you.


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5. How would you go about valuing a company whose stock you wereconsidering buying?This is probably the most popular technical question asked of MBAs. Oneanswer is to discount the projected cash flows by the company's risk-adjusteddiscount rate. After projecting the first five or 10 years, you add in a"terminal value," which represents the present value of all the future cashflows that are too far into the future to project. You can calculate the terminalvalue in one of two ways: (1) you take the earnings of the last year youprojected, say year 10, and multiply it by some market multiple like 20 timesearnings, and that's the terminal value; or (2) you take the last year, say year10, and assume some constant growth rate after that like 10 percent. Thepresent value of this constant growth rate is the terminal value. You shouldalso mention other methods of valuing a company, including looking at"comparables," or how other similar companies were valued recently.

6. What would the other members of your business school team have tosay about you?This is a question designed to probe your fit for I-banking. "I think anyonecan pick up investment banking," says one Merrill insider. "The question is,will they want to? It takes a special person to do it for extremely long hours."

7. Give me the sum of all the numbers between 1 and 100. "You're looking for people to think a lot. I think a lot of people go into itwithout realizing just how quantitative it is," says one insider. This is afamous question that 19th-century German mathematician Carl Gauss figuredout when he was a tot. Simply pair up 1 and 100, 2 and 99, and so forth.There are 50 such pairs of 101.

8. You have a painting that is $320 that is selling for 20 percent off. Howmuch is the discounted price?If you are applying for an analyst position, be ready for simple math questionsif you have a weak quantitative background. One recent hire at Merrill Lynchreports receiving this question.

9. Do you know the relationship between the price and yield on the bond?You should also be prepared for general economics questions like this one.As the yield on a bond (the interest rate it pays) increases, the price decreases.

10. What kind of salary do you expect after five years?(This would most likely be asked of prospective client employees only.)

11. Explain a crisis situation that you encountered and how you dealtwith it.


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12. If you could pick two people to take with you in a drive acrosscountry, who would you pick?

13. Describe the past deals you've worked on, and the strategic rationaleand valuation methodologies used.

Questions to Ask1. How much responsibility am I able to receive in my first year atMerrill?Merrill expects its first-year hires to accept a large amount of responsibilityright away, so this question indicates your willingness and eagerness to acceptresponsibility.

2. Merrill redefined the large financial services firm by merging I-banking capabilities and retail brokerage. However, recent trends pointto the reemergence of even larger "financial supermarkets" such asCitigroup. Are there any other retail businesses like, say credit cards,that the firm believes it should move into?

3. How has the recent trouble in worldwide financial markets affectedMerrill's aggressive overseas expansion plans?If you've read this report, you know that Merrill continues to expand in Japan.However, in an age of global consolidation among financial services firms,Merrill has had its eyes on other overseas markets.

4. How is Merrill responding to the I-banks and retail brokerages suchas Morgan Stanley and Citigroup that are becoming more like it? Doesthe firm believe that its advantage of massive distribution capabilitieswill be reduced?

5. How has Merrill changed since you joined the firm?

To ApplyAll employment information is available at www.ml.com/careers. The siteincludes everything from information on how to apply to profiles of currentemployees.


Job DescriptionsUndergrads join Merrill as full-time analysts in one of the following groups:debt, equity and relationship management; investment banking; privateclient; credit; investment management; service and operations; technology; oraccounting and finance. Those still in college can intern in these groups aswell; they're hired as summer analysts.

MBA holders join Merrill as associates in one of the following groups: debt;equity; investment banking; U.S. private wealth; U.S. private client businessmanagement; investment management; research; risk management; andhuman resources. Students between their first and second years at businessschool can intern as summer associates.

Financial Consultant, Global Private ClientGroup

Financial consultants build long-term financial advisory relationships withwealthy individuals, families and businesses, and provide advice on mattersrelating to investments, balance sheet management, retirement and estateplanning and other services. Financial consultants work closely withspecialists from the research department (among Wall Street's best) and fromother areas such as trusts, mortgages and mutual funds.

Associate, Sales and Trading

Traders are responsible for handling the firm's stock, bond and derivativespositions. Armed with multiple computer screens providing data from avariety of online financial information sources, such as Dow Jones Markets,Bloomberg and Reuters, traders regularly scan breaking news to keep abreastof every latest development that could affect the market. The trader quicklydecides if the latest news or economic numbers will affect the marketpositively or adversely – and acts accordingly. Traders work closely withsalespeople, who rely on traders for market information that they can thenrelay to their clients. Salespeople spend most of their days on the phoneadvising clients and taking buy and sell orders. Salespeople spend severalevenings each week entertaining current and prospective clients.

On the Job

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Summer Associate, Investment Banking/Salesand Trading

Summer associates in the investment banking division of Merrill Lynch spendtheir time performing due diligence on companies that their department ishired to sell or underwrite. Summer associates also create financial modelsand perform financial analysis. They prepare presentations on the basis oftheir analysis and also prepare pitchbooks for potential clients. Summerassociates in sales and trading have one or two rotations at each trading desk.Occasionally, they are assigned specific projects, but mostly they areexpected to watch, listen and ask questions. Sales and trading summerassociates generally work on one big project, on which they are supposed togive a presentation at the end of the summer.

You can check out the career section of Merrill's web site for further detailson these and other positions.

A Day in the Life

Analyst, Investment banking

9:00 a.m.: Arrive in the office, check overnight e-mail and phone messages.

9:30 a.m.: Eat breakfast in the office.

10:00 a.m.: Begin work on presentation to a prospective client. ("Themornings tend to be quieter than later in the day.")

10:30 a.m.: Write internal memorandum on potential problems with aprospective client. ("Highly, highly confidential material. If it gets read bysomeone who shouldn't see it, you'll get the sack, even if it's not your fault.")

1:00 p.m.: Eat lunch at desk. ("Sometimes the firm buys lunch for the floor,but usually it's out of your own wallet.")

2:00 p.m.: Put together a prospectus for a client issuing high yield bonds.

4:00 p.m.: Late appointment with upper management from the clientcompany.

6:00 p.m.: Order in dinner.

8:00 p.m.: Work on M&A pitchbook.


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On the Job

11:30 p.m.: Order car service and leave for home. ("On a deal, you might bethere until 3 a.m.. The average time I leave is about 11:30.")

Career Path

Undergraduates

After the training period, analysts meet with different groups, and areultimately assigned to one of them. "It's a lot more focused than it used tobe," says one insider of the assignment process. "It depends on what you'reinterested in and what their needs are. It would be rare to go in a group thatyou've never met before. I interviewed with all of them before I went in."

I-banking analysts usually stay with the company for two or three years, andthen leave to go to business school. However, exceptionally talented analystswill be promoted to the associate level without an MBA. Unlike some otherbanks, Merrill will not pay for an analyst to return to grad school. Says oneanalyst: "The analyst program is two years and most people make it clearbefore that time whether they want you to return or not." "They let youknow," confides another insider. "There are reviews. You have a manager, aVP, and they'll say: 'We think it would probably be in your interest to you todo something else.' It is a lot easier to become a third-year analyst than tobecome an associate. In each group, from each analyst group, there's one ormaybe two."

Sales and trading works differently. Sell side analysts have two three-monthrotations. Previously, the number of rotations was three or four, and analystsin New York could take one rotation in a foreign office, but "you can't travelanymore. It's a cost-cutting thing," reports one insider. After the tworotations, analysts join a group or "desk." Merely "average to good" analystsare normally promoted to an assistant VP level in two and half to three years.Reports one insider: "I think you'll eventually get a promotion, it's not like ininvestment banking, where it's two years and you're out."

MBAs

MBAs join Merrill as associates. In investment banking, the firm is, likemost banks, fairly structured in its career path, although the first promotionhappens more quickly than at some banks. Explains one insider: "Associatesare associates for three years. Then it's VP. About three or four years and thenyou're a director. Then you are a director for about four years, Then a


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managing director." Says an associate: "The time when bankers leave isusually after Christmas, after bonus time. They say never to talk about [your]remuneration, but it only takes a couple of hours to figure out where you arein the ladder [based on your bonus], whether you rank as a top associate or inthe bottom." In sales and trading, associates can expect a promotion to vicepresident in two to three years.

Training

Analysts and associates go through a centralized training program in NewYork for about two months. "Basically we have a general training program.It's a month and then it gets specialized into sales and trading, investmentbanking and technology for about a month," reports one insider. Says one I-banking analyst about the program: "It's full-time, 9 to 6. There used to be aweek at Princeton, but they don't do that anymore. They train you for Series7 [exams], which is unique – most firms don't do that. It's all those computers,finance, accounting, and Series 63 classes. There's a lot of spreadsheets andword processing, to some extent."


With new leaders and a leaner staff, Merrill looks remarkably different thanit did a couple of years ago. Still the firm stands among the top bankingfirms, succeeding both as a retail securities broker and as an investment bank.With the backing of a huge capital base, a leading corporate finance andM&A department, and Wall Street's most renowned – if not infamous –research unit, Merrill is poised to stay on top. As an employee, you mostlikely won't have to endure the snobbishness that afflicts many of WallStreet's bulge bracket banks, but you will probably encounter an unrivaledbureaucracy and grapple with severe "small fish in a big pond" feelings. Onething's for sure, though: Merrill Lynch's prestige and numerous strengthsmake the firm one of the best names to have on your resume.

Final Analysis

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VAULT CAREER GUIDESGET THE INSIDE SCOOP ON TOP JOBS

Vault guides and employer profiles have been publishedsince 1997 and are the premiersource of insider information on careers.

Each year, Vault surveys andinterviews thousands of employees to give readers theinside scoop on industries andspecific employers to help themget the jobs they want.

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You should check out Merrill Lynch's annual report, available online atwww.ml.com. Riding the Bull: My Year in the Madness at Merrill Lynch, byPaul Stiles, is an interesting account of the author's brief stint at the firm. Wealso recommend the following recent articles on the firm:

"Merrill Officer Quits, Firming O'Neal's Grasp," The Wall Street Journal,August 7, 2003.

"What Ever Happened yo Mother Merrill?" The New York Times, August 3,2003.

"Merrill's Earnings Soar 61% On Bond Trading, Cost Cuts," The Wall StreetJournal, July 16, 2003.

"Four at Merrill Accused Of an Enron Fraud," The New York Times, March18, 2003.

"Have Merrill's Bulls Been Led to Pasture?" The New York Times, January 5,2003.

"Merrill Lynch: See No Evil?" Business Week, September 16, 2002.

"Merrill Settles," The Economist, May 25 - 31, 2002.

"Thunderstruck," The Economist, May 25 - 31, 2002.

"Merrill forms New Operating Team That Doesn't Include Komansky," TheWall Street Journal, Feb 8, 2002.

"O'Neal Breaks the Mould in a White Man's World," Financial Times, July25, 2001.

Recommended Reading

Merrill Lynch


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