CASE STUDY

Case Study: Merger of Barclays PLC & Lehman Brothers Inc.

Case Study: Merger of Barclays PLC & Lehman Brothers Inc.

Introduction

Overview of Barclays PLC

Barclays PLC is a worldwide provider of financial services, including credit cards, retail banking, investment management and wealth management services, and wholesale banking in the America, Europe, Asia and Africa. It manages its overseas offices, associates and subsidiaries. Barclays has been serving people for more than 300 years; therefore, it is perfect at managing people and fulfilling customers' needs. The Bank employs over 140,000 people around the globe, together with helping millions of people financially (www.jobs.barclays.co.uk).

Overview of Lehman Brothers Holdings Inc

Lehman Brothers Holdings, Inc. was founded in 1850. It facilitates the corporations, institutions, municipalities and government, and high-net-worth individuals with the financial services around the globe. The company operates in capital markets, investment banking and the management of the investment. The segment of capital market encompasses the institutional activities of customer flow and the segment of investment banking provides the institutions and the governments with the advices related to the acquisitions, mergers and financial activities. While the investment management system provides wealth related advices together with providing investment. It also carries the asset management which facilitates the high-net-worth clients mainly (investing.businessweek.com).

Merger of Barclays PLC & Lehman Brothers

The Lehman Brothers was going through severe financial crisis because of market complacency, bad regulation of the market funds, and lack of transparency in the markets as a result of its imperfect monitoring of the mortgages, massive amount of issuance and the security issues caused by it in the investment banking segment, problems in money market funds, and transparency issues in the issuance of these funds and the services (Zingales, 2008 pp. 3-14).

Lehman suffered with the financial crisis because of the extremely high level of leverage i.e. asset-to-equity ratio and over dependency on the short-term debt financing. However, after the crisis, Lehman tried to reduce the impact of these two factors, but the company was still seen with doubts regarding its equity (Zingales, 2008 pp. 3-14).

It was then led by the Lehman's filing Bankruptcy on September 15th, 2008 under the Chapter 11. The bankruptcy of Lehman was the largest in the history as it had 639 billion dollars in assets and 619 billion dollars in debt. At the time, it had 25,000 employees, being the 4th largest bank of the U.S. The demise of Lehman had affected the global financial market in 2008, contributing the erosion of 10 trillion dollars in the capitalization of market (Zingales, 2008 pp. 3-14).

It was Barclays PLC that purchased the Lehman Brothers Inc. volume for 1.75 billion dollars on September 16th, 2008 despite of its liabilities of more than 600 billion dollars. It has acquired Lehman in Europe and some parts of Asia (Smith, et.al 2008).

Issues faced by the Management

As far as the management is concerned, the companies Barclays and Lehman carry greater involvement of internal and external environmental factors. In general, mergers are mainly required to offer social control, ensuring employee care and welfare with ...