We (MD St Louis) had no warning of what was about to happen, it was just sprung on us over a weekend. Not long before, we'd lost the 1st-round JAST/JSF downselect, and I remember thinking that it was the end of McDonnell Douglas. I was right. When I heard the announcement, all I felt was an intense feeling of relief, because now I had a fighting chance of still having a pension when I retired. I'd lost that confidence through a series of management-directed catastrophes on major programs (which is a whole other subject) and so news of the merger left me happy, not knowing at that time just how screwed up Boeing was as well. On the first workday after the announcement our boss gathered our group together and showed us a 2-page outline of things that managers were being told to emphasize to employees, mainly focusing on "it's not YOUR fault." They needn't have bothered, we knew whose fault it was. They also had some sort of psychological counseling available for anyone who needed it. I don't think anybody took advantage of it, I know nobody in my group did, or anyone else I knew across the company. That's how things went down in St Louis anyway.
The original question was "why McDonnell Douglas ended up going under" and if anyone's interested I can go into specifics about exactly why we lost JAST and other things, but basically there were no other tactical fighter/attack types of things anywhere on the horizon, and MDC's commercial business wasn't enough to sustain the whole corporation, so there was no choice except to find a buyer, and Boeing had the resources to close the deal.