JPMorgan battles to integrate unraveling Bear Stearns

By Chris Reiter and Paritosh Bansal

NEW YORK (Reuters) - JPMorgan Chase & Co's (JPM.N: Quote, Profile, Research) biggest challenge in integrating Bear Stearns Cos (BSC.N: Quote, Profile, Research) may be making sure there's still something left to integrate.

An exodus of Bear employees, who could take their unsettled clients with them, may further erode what value is left at the fallen investment bank.

"The people who make money for Bear Stearns get in the elevator and leave every night," said David Hinkel, who advises companies on merger integration issues for consulting firm Towers Perrin. "Due to the nature of the business, the people are the business."

Wesley Fredericks, a partner at law firm Heller Ehrman said, "What often happens in these situations is that the cream of the crop goes early and can re-establish themselves somewhere else."

PEOPLE PROBLEMS

Motivating and keeping Bear's 14,000 employees, which collectively lost about $3 billion on their Bear holdings over the past month as the investment bank collapsed, is a big problem for JPMorgan. CEO Jamie Dimon has reportedly called rival Wall Street firms and warned them to back off.

On Monday, JPMorgan raised its offer for Bear, which last year traded above $170 a share, to about $10 a share in stock. The original bid on March 16 was about $2 a share. JPMorgan also struck a deal to buy 95 million new Bear shares, a stake of 39.5 percent.

All told, the deal will cost JPMorgan roughly $9 billion in stock, transaction-related costs, and potential losses from Bear's portfolio.