M&A: waiting to pick up the bits

With people, assets and clients walking out through Lehman Brother's doors almost as quickly as the money had gone, regulators and legal teams appeared before a New York judge to resolve the Lehman Brothers' insolvency procedings as quickly as possible.

Barclays, touted as one of several companies interested in Lehman assets before the bank's collapse on Sunday evening, bounded back into the fray, offered cash and has wazlted off with a court order saying "go for it."

Both secured and unsecured creditors appeared before Judge James Peck to argue against the purchase. But the Judge said that Barclays was the only credible game in town and that he did not intend to see any risk of further deterioration in the bank by reason of delay. "There is effectively one logical purchaser for these assets. That purchaser has already identified itself, has been identified publicly to the markets, has been identified publicly to the employees and represents the continuity for this operation, he said.

He has a point: no one rushed in to help over the weekend as it became clear that it was all going bits up.

Lehman Brothers asked the Court for a poison pill: if another bidder comes along, disturbs the process and wins, then there will be a break-up fee of USD100 million plus expenses of around USD25m to be paid to Barclays.

JP Morgan, a large creditor, and regulators all backed the deal which will see Barclays pay what some consider a bargain sum: it will pay USD250 million and take over USD68 milliard in liabilities but against that gets assets currently said to be worth USD72 milliard for Lehman's North American Investment Banking and Capital Markets businesses, plus the company's very brash New York headquarters and two data centres - although that is at extra cost.

But just down the road from Barclays' London Headquarters, Lehman Brothers staff are likely to be less than happy with the outcome: they are not involved in the deal although employment agencies in London tell us that Lehmann Brothers' staff are already being seen by Barclays. PwC, the administrators in London, have said that there is enough money in the kitty to pay the staff for September, some of which will be funded by loans secured on Lehman assets in the UK. There would have been easily enough money available had the US parent not extracted a very substantial sum - admitted to as a fact but not as to the amount by PwC but rumoured to be more than USD7.5 milliard) late last week - just before it went so catestrophically wrong. That money, had it remained in the UK company may have been sufficient to ensure the survival of the UK unit pending a disposal, some think.

In the US, Barclays has already told Lehmans' staff to expect widespread redundancies although at least 9500 will keep move to Barclays. Currently, it is not clear if the name is included in the deal.