How will the impending merger of Bank of New York and Mellon affect the stock transfer landscape?

As we discussed in a prior article on this site, there are both bank-hosted and independent stock transfer agents — and even some “in-house” ones like Walt Disney and Sara Lee.   In recent years, three bank-hosted and three independent agents have dominated the stock transfer scene.   In the bank-hosted category these have been Wells Fargo, Bank of New York and Mellon.   Now, with the impending merger of the latter two at the corporate level, the bank-hosted stock transfer agent line-up in the heavy-weight category will be limited to just two.

We summarize below, as “good news” and “bad news,” what we think the upshot of this further consolidation of the stock transfer industry will be…

Good News

  • Simpler, less confusing choice of agents
  • Mellon and Bank of New York will cherry-pick each other’s strengths, producing a better service provider than they were on their own
  • The larger “scale” of the new entity should enhance cost efficiencies, for the benefit of clients
  • The larger entity will presumably have a larger research and development budget to speed up technological innovations in the industry
  • More clients of an agent offer more “networking” opportunities amongst them to optimize use of the agent
  • For those wanting U.S.   stock transfer to stay in U.S.   hands, this merger is a relief
  • There will now be a particularly large U.S.   agent competing with the largest global agent, who operates in the U.S.   as well (Computershare)

Bad News

  • More limited choice of agents
  • Fewer agents could entice all of them to charge higher prices, on the theory “where else will consumers go??”
  • Fewer agents could entice all of them to write their contracts with terms and conditions somewhat more in their favor
  • Unless Mellon and Bank of New York keep all their client service people after the merger – highly unlikely – there will simply be fewer people available in the industry to serve clients and shareholders (and the workloads of people who remain will go up)
  • There will be one less vendor to support (fund) important industry groups taking securities transfer into the 21st century

Shareholder Service Solutions® considers this merger a “net negative,” diminishing necessary competitive forces, and human/financial resources, in the stock transfer marketplace.   It will likely make it even more difficult for buyers (corporations) to know they are receiving the best achievable service for the best possible price, for themselves and for their shareholders.