M&A: Lehman Bros fire sale

There is an interesting equivalence in the stories of Barings and Lehman Brothers, although there is also a startling difference.

First the similarity: both Barings and Lehmans were sunk by management greed taking precedence over the simple and basic principle that you should not do business you don't understand.

In the case of Barings, it was swaps in a one-man-band division in Singapore that sank it because the bosses in London saw figures claiming huge profits on a business that was making massive losses.

In the case of Lehman Brothers, it was a systemic failure: the assumption that so-called asset-backed securities were safe because they were packaged by bankers experienced in the field of property loans, forgetting that, by removing the risk from those bankers and paying them for the arranging and managing of the loans, there was no reason to be prudent on lending decisions.

ING bought all of Barings for GBP1. Plus a shedload of debt.

On Monday, Nomura said it would buy Lehman's "franchise" in Asia Pacific. "It does not include any trading assets or trading liabilities," the company said in a statement.

On Tuesday, came the announcement that Lehman's "European and Middle Eastern equities and investment banking operations" had also fallen to Nomura whose press-releases from Monday to Tuesday had changed so that the latter one described Nomura as " the pre-eminent Asian-based investment bank." Not a bad accolade to grow to in 24 hours, even if it is one the bank ascribes to itself. For the EU business the company says "The deal does not include any trading assets or trading liabilities and Nomura will pay an undisclosed sum for the businesses." Press reports say it's USD2. The company also says that it intends to retain a "significant proporation" of the 2500 staff employed in the division.

But something else is different: the allegations persist that Lehman's London was driven into insolvency by a cash-snatch to repatriate funds to the USA right before the US company collapsed. Some point out that, if the money was due under inter-company charges arrangements that were documented and were business as usual, then there is no criticism. But if the money was not due then and there, it might have been used to keep the UK operations going for several months, possibly even to give time for a management buyout.

It will be interesting to see just what Nomura has bought, and for how much.

Both deals are subject to regulatory approval but because the companies are in administration, shareholder consent is not required. Even so, they are both open to challenge if a better offer comes along.

Anyone got a spare fiver?