When I first heard the story of Bank of America acquiring Merrill Lynch for $50 billion dollars, I was flabbergasted and shocked. “Merrill Lynch, the 5th largest investment bank, acquired by a consumer bank overnight?!” I thought. I was disgusted, to say the least. But after letting my emotions run wild for a night and going back to work the next morning, it hit me: the move was pure genius.

I was talking with Mr. Justin Shaw, who also interned at Merrill Lynch, before the weekend and he said that Merrill was going to be next dead fish in the sea and he hit the nail head on. I told him that Merrill already sold off a lot of its risk, which comes from the extremely risky CDOs (collateralized debt obligations) for pennies on the dollar to private equity, unloaded some of its asset/mortgage-backed holdings, and reduced its balance sheet to reduce the risk of depreciating assets. Merrill Lynch, who told its clients that it was still strong in this volatile environment, ended up selling itself as a last-ditch effort to save the clients, the company, the name, and the legacy, unlike its belly-up rival Lehman Brothers.

The move was pure genius, I must admit. I read over an internal presentation called “Creating the Premier Financial Services Company in the World” by Merrill Lynch Chairman John Thain and Bank of America Chairman Ken Lewis and the deal makes absolute sense. Although Mr. John Thain originally went to Goldman Sachs and Morgan Stanley first, I believe that the synergy with Bank of America is unmatched by any other company since there is little overlap. The deal makes sense financially because of Merrill Lynch’s large writedowns which are beneficial to Bank of America. After acquiring Countrywide Financial, Bank of America was able to take Countrywide’s writedowns and have it be tax-deductible (writedowns and some losses are tax deductible) meaning Bank of America saves billions of dollars a year from just Countrywide alone. Adding Merrill Lynch’s writedowns will allow Bank of America to keep more money to itself instead of paying it out to the taxpayers. Let’s just hope they increase their dividend because of this.

The acquisition, I believe, is beneficial to everyone: shareholders, clients, and employees. Shareholders receive a about a 70% premium to Friday’s close, clients get to keep their assets with Merrill Lynch and have more financial products available to them via Bank of America, and employees will get to keep their job, but most importantly, their stock options and compensation. Lehman Brothers employees who had stock options, were left with nearly nothing as Lehman croaked. Imagine if you were an investment banker working 70+ hours a week with hundreds of thousands or even millions in Lehman stock options and compensation, all of which you were unable to exercise.

You have Bank of America as one of the largest US consumer banks who deals with deposits and credit & debit cards, combined with their financing and lending power by recent acquisition of Countrywide Financial, the largest mortgage lender in the United States, and now Merrill Lynch, an investment bank and global wealth management firm, with 20,000 financial advisors and $2.5 trillion in client assets. This gives you a global bank that will have a tremendous amount of power and financial diversification.