Nomura’s great leap forward: Will Lehman takeover help fulfil its global ambitions?

The race to sell Lehman Brothers before it fell apart
Nomura in Europe: the appointments so far

"I WANTED TO pay exactly one quid [£1] but my arm was twisted, and we rounded up to $2," says Sadeq Sayeed. Something in his voice betrays the astonishment he must feel about the deal: these days that wouldn’t buy you a ticket on the London underground, a beer or most Sunday newspapers but it is what Nomura paid for the European and Middle East operations of Lehman Brothers, the failed US investment bank.

Sayeed, who will head the new Nomura Europe, was, together with Nomura COO Takumi Shibata, responsible for the Japanese firm’s victory in the negotiations for Lehman’s European and Asian businesses and he has emerged with his reputation as a dealmaker much enhanced. His negotiating style is apparently on the reserved side: recent interviews have described him as "quiet" and "taciturn".

"My friends were more shocked by that description than I was," says Sayeed, "I don’t think they think of me as being particularly quiet."

Sayeed speaks warmly of the round-the-clock work his staff at Nomura’s London headquarters put in between Lehman going into administration on September 15 after the collapse of talks with Bank of America and Barclays, and the eventual purchase by Nomura of the US firm’s European and Asian businesses after lengthy simultaneous negotiations in London and Hong Kong over the weekend of the 20th and 21st. Before the story of how the deal was done in the face of intense competition from Barclays and Standard Chartered, among others, there is the question of why Nomura was interested in the first place. The firm had turned down an earlier request to help Bear Stearns when the US investment bank went under, raising the question of just what would entice it to spend the ¥200 billion ($2 billion) it had set aside for overseas acquisitions.

"That was when you might say the light bulbs started flashing in both of our minds," he says.

"We had been approached just before that fateful weekend about buying the whole of Lehman but after careful consideration we decided that it just wasn’t what we wanted. When Monday rolled around and the Bank of America deal didn’t happen, and Lehman decided to pursue this strategy of keeping the US business whole and abandoning, if you like, the rest, we decided to go after the Asian business, which was going into liquidation, and the European piece, which was entering administration."

Shibata and chief executive Kenichi Watanabe took over Nomura Holdings in March when Nobuyuki Koga stepped down after five years at the helm. Koga admitted in interviews at the time that he was not the right person to pursue the firm’s ambitions of becoming a truly global investment bank, and the new management was instrumental in persuading the firm’s board that the Lehman deal was an unprecedented opportunity to fulfil that ambition.

"The board were very clear that we needed to do something internationally," says Sayeed, "and there were two factors that helped us convince them that this was the right deal. First, we ensured that we were not taking on Lehman’s balance sheet and the risks that that would have entailed, and secondly we recognized that the parts of the franchise we were pursuing were unpolluted. The teams in Asia and Europe are full of good people, who are customer focused and dedicated to generating revenues from clients, not proprietary activity."

These people were in a bad situation on September 15, a day referred to by several people interviewed for this story as "that fateful Monday". It was then that Lehman entered Chapter 11 bankruptcy after weekend talks with Barclays and Bank of America (which were considering buying all of Lehman) had collapsed. As the media surrounded the firm’s offices to capture photographs of workers leaving the building with cardboard boxes, those iconic images of corporate collapse, many working at Lehman must have feared a long stretch of unemployment. Simon Boadle, a corporate finance partner at PricewaterhouseCoopers, takes up the story.