8. Buy or Build?

Once Morgan’s management committed to transform the firm, it had to develop a strategy to pull it off. There were two directions it could go. One was to gain expertise via acquisitions that regulators would sanction; the other was to build a capability in investment banking and securities organically. For Lew Preston the choice was clear. Morgan would primarily build these businesses organically. The reason: He wanted to preserve Morgan’s culture and the bank was involved in only one merger, that with the Guaranty Trust Co., in the post-war era. However, Preston was willing to consider targeted acquisitions that were good strategic fits provided the price was right. One challenge was whether Morgan could marry two prototypes—commercial bankers and investment bankers—without a culture clash. Another was Morgan’s compensation was considerably below investment banks.