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The Failure of the Nomura and Lehman Brothers Acquisition

Essay 2017 8 Seiten

VWL - Finanzwissenschaft

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The Failure of the Nomura & Lehman Brothers Acquisition

The Lehman Brothers Holdings Inc. was a former global financial services firm, which worldwide headquarters were located in New York City, United States (“Topic - Lehman Brothers”). Through its subsidiaries the firm provided its services to governments, corporations, institutions and individuals (“Company Overview of Lehman Brothers Holdings, Inc.”). On September 22 in 2008, after it collapsed because of bankruptcy, the CEO of Nomura Holdings Inc. announced the acquisition of Lehman Brothers’ Asia-Pacific, later also European and Middle-East branches (“Cultural Differences in International Merger and Acquisitions”). Nomura is a leading Japanese financial holding company with headquarters in Tokyo, Japan. Like Lehman Brothers it provides various financial services worldwide (“Company Overview of Nomura Holdings, Inc.”). Within a few weeks, they completed the deal, acquiring most of Lehman Brothers’ Outside-US-Businesses and taking over more than 8.000 of its employees (Choi, Soon Y.). Opinions about the acquisition from the industry and media were split in those days. At first glance, it had a lot of potential for both parties and seemed to be a successful one. It looked like a win-win-situation, top employees from Lehman Brothers could keep their jobs by working in one of Asia’s biggest financial companies. Nomura in turn would get another chance to lever the global financial crisis and fulfill their long-time dream of becoming a global player. Their main objective was to establish footholds outside Japan as well as benefit of the great expertise of the key players from Lehman Brothers (“Cultural

Differences in International Merger and Acquisitions”). Others were pessimistic about Nomura’s ability to acculturate the Lehman’s corporate culture and predicted them to get cursed (Choi, Soon Y.). What happened proved them right: Already in the first months, signs of a potential failure came to light. As a consequence of huge financial losses in the first months, by the end of 2008, many Heavy-Weights of Lehman Brothers left the company. The reason for this upcoming disaster was the cross of two completely different corporations which resulted in conflicts wherever one looked. Huge cultural differences or rather a tremendous gap between the Asian culture and the American or European were discussed. Nomura forced an enormous imposition of its own culture on the new employees. Consequently, the once promising acquisition was condemned to fail, although it still exists today (“Cultural Differences in International Merger and Acquisitions”).

Many experts tried to focus on and figure out possible reasons that lead to the failure. They have some significant differences in their perspectives.

Michiyo Nakamoto found out that the failed integration of the new employees resulted out of lacking confidence, frustration and mismanagement because many bought Lehmanites just waited for their second bonus to leave the company immediately after. Linguistic and communicational issues between the foreign business people and the Japanese staff were a big factor as well. In Nakamoto’s opinion this should have been the subsequent reason why the Japanese stopped to report information to the foreign managers. They basically just had huge problems at making themselves understood in the English language because they just can’t speak it well. In the following they felt extremely uncomfortable when encountering others which lead to an increased passivity. This little cultural revolution, developed by establishing or rather pushing the English language into Nomura’s daily business life, lead to huge morale damages of the Japanese staff because it also acquired talent. The point that former bankers said they didn’t have things in common with the Japanese ones aside from taking the same elevators every day and the Japanese workers who in turn spoke of Lehmanites just caring about their compensation were resulting effects of this issue (Nakamoto, Michiyo). It underlines that in Nakamoto’s view the communicational aspect concerning the arose troubles between both parties played a big role on its way to fail.

Alison Tudor touched the topic by saying that the failure was due to the mix of many nationalities with a result of different human values, etiquettes and daily life rules. One the one hand there were some, from an objective point, amusing occurrences that e.g. teams of Nomura traders were singing company songs every morning to start the day. Or the transition team that was sent to each department around the world to support the integration. But both was immensely annoying to the Lehmanites. On the other hand, Nomura treated women its own way. The department for human resources changed E-Mail addresses of female employees from their maiden names to their married names without asking. Sometimes, female employees weren’t allowed to join meetings because of a strict door policy. Also, soon after the acquisition, Nomura started trainings to assist the integration progress by separating women and men. Women got strict instructions on how to serve the tea for other business people. In addition, an extensive dress code was published on the internet page so that no woman could choose the wrong clothes or wardrobes for business according to the seasons. Also, women were taught how to wear their hair by removing highlights and streaks from it to avoid individual looks. Or clothes without bright colors that have to be longer than the mid-bicep. If women missed the dress code by e.g. wearing a short-sleeve dress under a jacket they were send home for behaving inappropriately. As it becomes apparent, Tudor is focusing a lot on daily life issues that occurred and maintains that these differences were pivotal for the final negative development of the acquisition (Tudor, Alison).

Soon Young Choi stated that the cultural issues which lead to the failure were a cause of the different business behaviors and attitudes. Lehmanites were used to have a very aggressive, powerful, high risk tolerant and fast decision-making way to do business. Nomura, on the contrary, is very hierarchical, conservative and prefers more stable, moderate and constant revenues instead of momentous enormous ones. According to Choi, the difference was also evident in their approach to prioritize clients. Lehman Brothers privileged to focus on fee generation and put the clients into categories according to how much they pay instead of building long-term relationships with them. Nomura, on the other hand, favored to work with old, loyal and reliable clients rather than searching risky deals with, perhaps, more potential. Also, Choi says that another big issue was the trust. Lehmanites felt shadows in their backs because Nomura constantly followed them by taking notes on their pads about their performance to report to other executives. They were just quietly judging without saying any words, even the top-level executives. Choi went into detail by breaking down the specific business attitudes of both parties and claims that this was the main reason for the end of the story (Choi, Soon Y.).

The theory and analysis of Michiyo Nakamoto introduced a very big and important topic of all business matters, the language. It is a huge subtopic of communication: “One cannot not communicate.” (“Appendix 3: Watzlawick’s Five Axioms”). In case of this acquisition it became clear that there were immense problems in terms of communicating through the English language. Although Nomura was an international company which had to deal in English on the top level,

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Details

Seiten
8
Jahr
2017
ISBN (eBook)
9783668948211
Sprache
Englisch
Katalognummer
v469309
Note
1,0
Schlagworte
Failure Nomura Lehman Brothers Acquisition Merger Corporate Business Culture

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Titel: The Failure of the Nomura and Lehman Brothers Acquisition