Question

In September 2008, Lehman Brothers went bankrupt. Lehman’s assets in Asia and Europe were purchased by Nomura for the bargain price of $200 million. Founded in 1925, Nomura is the oldest and largest securities brokerage and investment banking firm in Japan. Although Nomura had operated in 30 countries prior to the Lehman deal in 2008, it had always been known as a significant but still primarily regional (Asian) player in the big league of the financial services industry. The deal was expected to boost Nomura’s presence in investment banking. Four years later, the performance has been disastrous, with Nomura losing an aggregate of $440 million since its Lehman acquisition.

Q1: What is the strategic fit between Nomura and Lehman?

Q2: Is there any organizational fit? How can the gaps between the cultures of these two firms be bridged?

Q3: How does Nomura alleviate the concerns of multiple stakeholders?

Q4: How would you predict the effectiveness of Nomura’s transformation after this acquisition to be?

Answer 1

1. What is the strategic fit between Nomura and Lehman?

Nomura’s acquisition of Lehman Brothers was not at all a Strategic Fit. In Merger and Acquisition, there will be Strategic fit when the involved parties utilize each other’s opportunities for a much better off situation, so that the merged entity becomes more valuable and profitable in future. Organizations conduct M&A fitness assessment in terms of demand, goals, policies, culture, values and productivity before approaching. However, here in this case, merging with a Bankrupt organization and losing $ 440 million since then, clearly indicates that Nomura poorly planned this M&A and lacked Strategic fit analysis.

2. Is there any organizational fit? How can the gaps between the cultures of these two firms be bridged?

There is no organizational fit between Nomura and Lehman Brothers. It’s vital to note that parent company is from Japan and the acquired firm is from the USA. Clearly there are cultural gaps between these two countries as well as the firms. Nomura’s loss since its acquisition implies that the existing employees must be disappointed with their salaries and other privileges. This could lead to dissatisfaction and lack of motivation. The firms’ policies and norms were different from each other, which could have worsened the situation. Most importantly management’s approach and decision making to progress collaboratively led to plenty of conflicts within the merged entity.

The gaps between the cultures of these two firms can be bridged, if they set common goals, and practices. They should focus on emphasizing each firm’s core strength, which can optimize revenue. Most importantly Nomura should treat all employees equally as per common policies, common benefits, so that people should be motivated to adapt new policies and work productively in line with the company's goal.

3.     How does Nomura alleviate the concerns of multiple stakeholders?

There is no option of going back and stepping out this M&A for Nomura, which could damage both the firms drastically. Failure of this M&A is due to Nomura's lack of Strategic insights, poor planning and execution. All the stakeholders must have lost their trust in the organization. Nomura should reconsider its vision of being a global brand and plan accordingly to properly implement from scratch. Investors should be convinced with the long-term benefits of being a global brand, including a 5 year or 10-year business plan. The firm should change its policies to fill the cultural and moral gaps. Employees should perform within a common hierarchy, having respective salary and benefits. Most importantly management should be concerned about elevating both firm’s best practices, minimizing conflicts, and improvising trust in its customers.

4. How would you predict the effectiveness of Nomura’s transformation after this acquisition to be?

Nomura acquired Lehman Brothers because of its bargained offerings and the vision to make Nomura a global Investment bank. The answer to Question 3 might alleviate the situation, but Nomura can never be as productive as it was before acquisition. The firm is not only losing its Revenue but also, it’s losing its customers, employees and investors faith. The loss could grow further unless the management standardised its practices and policies. Its execution was a disastrous failure and without having any recovery plans, the firm has to bear this loss.