Barclays Acquisition of Lehman Brothers
Background
Barclays PLC, one of the main saving banks in the United Kingdom, agreed Sept. 16, 2008, to purchase the volume of Lehman Brothers Inc. for $1.75 billion. It has acquired parts of Lehman's equities commerce in Europe and took on some Lehman workers in Asia. Lehman, the fourth major asset bank in the United States, was one of the victims of the subprime advance disaster that led to the administration stand security of Bear Stearns in March 2008 and the conquest of advance giants Fannie Mae and Freddie Mac by the U.S. Treasury in advance in September of 2007. Worth as much as $45 billion in early 2007, Lehman incurred almost $4 billion in losses in the third quarter has seen its stock worth fall down and was faced with disciplinary downgrades in its credit rating, which would have made it tremendously hard to raise much-needed capital. (Clark, 2008)
Fuld who was the Head of Lehman sought Chapter 11 bankruptcy defense for Lehman on Sept. 15 2007 after U.S. Treasury Secretary Henry Paulson made it obvious that the administration would not spend any of taxpayers money to fund any of Lehman’s faulty asset. Under Chapter 11, which shields a corporation from creditors' lawsuits while it reorders its finances, Lehman became more attractive to Barclays; the British bank then bought Lehman's choicest bits devoid of assuming its more than US$600 billion in liabilities.
Under the terms of the contract, which got approval from the insolvency court, Barclays got Lehman's North American fixed-income and equities sales commerce, as well as its trading, investigation and investment-banking operations. These Lehman units utilize about 10,000 people. Barclays bought Lehman's New York head office and two data centers in New Jersey. As the Wall Street Journal put it, Barclays's acquire includes most of Lehman's "people, permission, brand name, skill and clients but (not its) dangerous trades and liabilities that had hurt Lehman in the marketplace" before it sought bankruptcy defense (Wall Street Journal, "Lehman, Workers Score Reprieve," Sept. 17, 2008).

Aims/benefits of Acquisition
The Acquisition combined two strong client franchises and product offerings, with the potential to create significant value for Barclay’s shareholders. The Lehman Brothers businesses formed a highly complementary fit for Barclay’s investment banking business, Barclays Capital.The acquisition aim at creating a premier integrated global bulge bracket investment banking company with a leading presence in all major markets and across all major lines of business including: equity capital markets, debt capital markets, mergers and acquisitions, commodities trading and foreign exchange (Barclays newsroom Sept 2008). Among other benefits, the combination of the two businesses will: * confirm Barclays Capital as a leading debt capital markets house globally; * have a top 3 position in the US capital markets, the largest in the world; * extend Barclays Capital's range of investment banking products, with the addition of Lehman Brothers strong US M&A and equity capital markets franchises; and * Strengthen Barclays Capital's hedge fund franchise through the addition of prime brokerage and cash equity capabilities.

Economic and Political Implication of the Acquisition
The financial sector was in turmoil after the housing bubble burst in 2007. Without the merger of the two entities many more people would have been left unemployment, placing further pressure on the government .With the Lehman's US business taken over by Britain's Barclay's Bank many of the employees of Lehman were absorbed in U.S and London office, even though Barclays had later downsized and layoff some of these persons. It was however, very important to keep employee turnover low at the time because business continuity is the key to realizing the benefits of an Acquisition. There can be large financial implications from the cost of hiring new employees, the loss of knowledge/intellectual capital, and the loss of client relationships. Therefore it was very important for the organization to maintain and regain employee trust in order to keep them on board as this would help reduce the turnover during the Acquisition. The Acquisition resulted in the proportion of Barclays revenues derived from the US rising significantly as it market share expand. Customers also benefit from having all there financial needs covered by one entity.
From a political prospective the US Authorities were supportive of the sale of Lehman Brothers. Early discussion for Lehman takeover was led by US authorities who were anxious to get a bail out for the company and avoid the firm from going bust. The Fed, and the US Treasury, was trying to secure a saviour for Lehman ahead of the Asian markets opening on Monday Sept 15 2008. The government was unable to secure an early deal and on September 15, 2008 Lehman Brothers filed for Chapter 11 under the bankruptcy protection act. Barclays acquired Lehman after the Chapter 11 filing. (Teather, 2008)
The New York Stock Exchange on September 18, 2008 Filed a notice with the Securities and Exchange Commission proposing the temporarily suspension of the requirements of NYSE
Rule 311 and related rules regarding the approval of member organizations in order to immediately approve as an NYSE member organization the entity that acquires the assets of Lehman Brothers Inc. (“LBI”). This proposal was done on a temporary emergency basis to ensure that the acquiring entity, Barclays Capital Inc. (“BCI”), which is a U.S. registered broker dealer and FINRA member, to be able to expeditiously complete its proposed acquisition of certain LBI assets and begin operating former LBI business lines, including its specialist operations, as early as September 22, 2008. This proposed temporary suspension is contingent upon BCI having applied for and been approved as a new member organization pursuant to Exchange rules within 60 days of the date that BCI is provisionally approved as an NYSE member organization pursuant to this filing. (Securities and Exchange Commission, 2008) U.S. Bankruptcy Court Judge James M. Peck approved the sale of substantially all of the assets of Lehman Brothers, Inc., to Barclays Capital on September 20, 2008. The court’s approval came days after Lehman’s parent company filed for bankruptcy, brings immediate and significant benefits to Lehman’s brokerage customers and the capital markets. The court’s decision followed a marathon eleven-hour hearing in a packed Manhattan courtroom where attorneys from the SEC and other government agencies successfully supported Lehman’s argument that swift approval of the deal was in the national interest. (Washington, D.C., Sept. 20, 2008)

Criticisms and Support to Acquisition
In response to this opportunity, certain Barclays’ shareholders have expressed support for the transaction and interest in increasing their shareholdings in Barclays. The Board of Barclays expects these discussions to lead to a subscription of at least £0.6bn (US$1bn) of additional equity. The proposed transaction with Lehman Brothers and the additional equity would result in an enhancement of Barclays’ earnings and capital ratios. (Massaro, 2008)
John Varley, Barclays Group Chief Executive of Barclays said “The proposed acquisition of Lehman Brothers North American investment banking and capital market operations accelerates the execution of our strategy of diversification by geography and business in pursuit of profitable growth on behalf of our shareholders, in particular increasing the percentage of Barclays earnings sourced in North America. This transaction delivers the strategic benefits of a combination with Lehman Brothers core franchise, whilst meeting Barclays strict financial criteria, and strengthening our capital ratios.”
The acquisition was favored even by the US Securities and Exchange Commission (Washington, D.C., Sept. 20, 2008) Securities and Exchange Commission Chairman Christopher Cox announced that U.S. Bankruptcy Court Judge James M. Peck this morning approved the sale of substantially all of the assets of Lehman Brothers, Inc., to Barclays Capital. The court’s approval, just days after Lehman’s parent company filed for bankruptcy, brings immediate and significant benefits to Lehman’s brokerage customers and the capital markets.
Steven Solomon professor of law at the University of California thinks Barclays made a good deal by doing what should be done in an acquisition, carefully assessing the future liabilities of Lehman Brothers and limiting them as much as possible. However, Barclays did this acquisition only because it was forced to by the regulator. (Solomon, 2011)
Critic Francesco Guerrera (Wall Street Journal’s Financial Editor) commented that Lehman’s aggressive; risk-taking culture produced the reckless bets that destroyed the firm. He described the Lehman’s brand of investment banking as pugnacious, scrappy and paranoid. He said the purchase was a masterpiece but one that fell out of fashion pretty quickly. Some of Lehman’s traditional strengths were undermined by new rules and changing investor needs.
Barclays and its shareholders have gained because the U.K. bank was nowhere in these markets before the acquisition. But the overall result is that one plus one equaled one. Or less than one if you look at profits. Lehman’s 2007 return on equity a measure of profitability was 20.8%. In 2013, the same metric for Barclays’s investment bank was 8.2%, in line with many of its peers. (Guerrera, 2014)
Merger of JP Morgan and Chase Manhattan Corporation
Background
Chase Manhattan Corp. purchase J.P. Morgan & Co. in a stock arrangement that unites two of the country's greatest banks and keeps on reshaping the quickly combining money related administrations industry. (Isidore, 2000)
The new organization is called J.P. Morgan Chase & Co., keeping two of the most settled names in U.S. Banking. On the other hand, the retail banking operations hold the Chase Manhattan name and Chase filled the greater part of the positions on the leading group of the consolidated organization.
The consolidated organization end with $660 billion in resources, which keeps it as the third-biggest bank holding organization in the United States of America, the same as Chase's present positioning. The two organizations had joined 1999 net pay of about $7.5 billion and income of about $31 billion.
Under the arrangement, Morgan estimated shareholders will get 3.7 shares of Chase stock for each of their shares. In view of New York Stock Exchange closing price, the organizations said the arrangement is esteemed at $207 a share, or about $33 billion, at a 16.7 percent premium over Morgan's customary hours close of $177.75.
Aim of Merger
The two organizations suspect merger-related expenses of $2.8 billion before taxes and yearly funds of $1.5 billion, with around a third originating from land, a third from frameworks reconciliation and a third from diminished staffing.
The organizations likewise predict about $400 million in incremental income development. That development is more critical to the arrangement than the expense reserve funds, according to Warner and Harrison in their interview with CNNfn.
The expect growth from been able to offer Morgan’s more extensive scope of items to Chase's much bigger customer base. The merge aim to gain market share and to achieved a competitive advantage. (Finance Maps of World, 2013)
Political and Economic Implication of the Merger
On 13 December 2000 the Competition Tribunal issued a merger clearance certificate approving the merger between The Chase Manhattan Corporation and J.P. Morgan and Company Incorporated without conditions in terms of section 14(3)(a). Some of the reasons given for the approval include: * The merger will not result in the lowering or prevention of competition in either of the relevant markets. * JP Morgan is a relatively new and small player with less than one percent of the market share in the corporate finance services market. Even though the merging parties presently compete with each other in this market, the merger will not materially affect the structure of the competition given the small share of the market currently held by JP Morgan. * There was very little overlap between the businesses of the merging parties in the bond trading market. Chase Manhattan participates in the primary trade in bonds; they structure and underwrite bond issues on behalf of clients. JP Morgan, on the other hand, participates exclusively in the secondary bond trading market for the benefits of its clients. * Both companies operated in very competitive markets and the merger would not result in the parties gaining market power. * The Tribunal agrees with the Commission’s assessment of the effect of the merger on competition and is satisfied that the merger will not result in lessening or prevention of competition in any market. (Manoim, 2000)
From an economic prospective both companies are involved in the financial services industry; offering services that complement rather than compete with each other. The merger will result in huge cost savings for the merged entity worldwide. The merger resulted in a larger bank balance and pool of expertise which would enable them to offer new services to their clients in South Africa. As a combined entity, JP Morgan Chase Co. (JPMC) offered a multitude of product lines to consumers and corporations ranging from credit cards, project financing, bonds, stockbroking, and insurance that either company was unable to offer as a single entity.
Criticism and Support for the Merger
Chip Dickson, banking examiner at Lehman Brothers, told CNNfn's that he hopes to see a 10-to-20 cent an offer hit on profit one year time. Analysis overviewed by First Call conjecture that Chase would make $4.45 share one year time after the merge, up from the determined benefit of $4 in 2000. (Isidore, 2000)
Dickson said the arrangement ought to be a decent one for Chase, regardless of the to some degree grandiose price. "What the arrangement does is it gives Chase more prominent position or more grounded positions in the common development ranges of the financial business, as far as capital markets, venture saving money.”
Merrill Lynch's Judah Kraushaar, considered one of Wall Street's driving banking examiners, said that while apprehensions of the transient profit hit may discourage price in the short run, Chase's offer cost can be relied upon to pick up on the arrangement. He repeated a "purchase" rating on the stock. "This arrangement ought to at long last resolve long running financial specialist worries that CMB would be drive to pay an excessive cost to enter the values business either by acquiring or interior venture”.
However, others experts said that the mix of the two settled in associations will be troublesome, and that they accept that the present offer costs will be hard to backing once the hypothesis on future mergers is uprooted.
"Chase paid top dollar and this is going make considerable strains on Chase," Charles Peabody, investigator with Mitchell Securities, told CNNfn’s. "There's colossal execution danger going ahead that will be an exceptionally troublesome cultural fit."
Andy Collins, the banking and business investigator at ING Barings, downsized both organizations' shares because of incorporation issues, despite the fact that he kept Chase with a purchase rating instead of his past solid purchase proposal. (Isidore, 2000)

References

Barclays (2008, Sept 17). Barclays announces agreement to acquire Lehman Brothers North American investment banking and capital markets businesses. Retrieved June 15, 2015, from:http://www.newsroom.barclays.com/releases/ReleaseDetailPage.aspx?releaseId=1435
Clark, D. T. (2008, September 17). Barclays agree $1.75bn deal for core Lehman Brothers business. Retrieved June 15, 2015, from The Guardian: http://www.theguardian.com/business/2008/sep/17/barclay.lehmanbrothers1
Guerrera, F. (2014, May 5). The Lehman Brothers Ethos Fades at Barclays. Retrieved June 16, 2015, from The Wall Street Journal: http://blogs.wsj.com/moneybeat/2014/05/05/the-lehman-brothers-ethos-fades-at-barclays/
Finance Maps of World. (2013, July 29). Chase Manhattan JP Morgan merger. Retrieved May 30, 2015, from Finance Maps of World: http://finance.mapsofworld.com/merger-acquisition/company/chase-manhattan-jp-morgan.html
Isidore, C. (2000, September 13). Chase buying J.P Morgan. Retrieved May 30, 2015, from CNN Money: http://cnnfn.cnn.com/2000/09/13/deals/chase_morgan/
JP Morgan Chase and Company. (2000, November 13). Form S-4/A Registration Statement. Retrieved June 16, 2015, from JP Morgan Chase: http://investor.shareholder.com/jpmorganchase/secfiling.cfm?filingID=950123-00-10251
Manoim, N. (2000, December 21). Chase Manhattan Corporation and JP Morgan and Company Incorporated (99/LM/Dec00) [2000] ZACT 52. Retrieved June 20, 2015, from Saflii Southern African Legal Information Institute: http://www.saflii.org/za/cases/ZACT/2000/52.html
Massaro, K. (2008, September 17). Barclays to buy Lehman's Capital Markets Operation. Retrieved June 15, 2015, from WallStreet & Technology: http://www.wallstreetandtech.com/barclays-to-buy-lehmans-capital-markets-operation/d/d-id/1260281
Solomon, S. D. (2011, September 13). The Merrill Lynch and Lehman Deals, 3 Years Later. Retrieved June 15, 2015, from The New York Times: http://dealbook.nytimes.com/2011/09/13/the-merrill-lynch-and-lehman-deals-3-years-later/?_r=0
Teather, D. (2008, September 14). Barclays pulled out of move to resue ailing US banking giant. Retrieved June 16, 2015, from The Guardian: http://www.theguardian.com/business/2008/sep/14/lehmanbrothers.barclay Washington, D.C. (2008, September 20). SEC Acts to support swift court Approval of Barclays Acquisition of Lehman Brothers, INC. Retrieved June 15, 2015, from US Securities and Exchange Commission: http://www.sec.gov/news/press/2008/2008-210.htm