The MERGER of BARCLAYS PLC AND LEHMAN BROTHERS

August 15, 2017 Management

Introduction

For the first clip since it began checking and foaming in the obscurest corners of the Wall Street in September 2008, the Credit Crisis eventually had a human face. The prostration of the universe ‘s 4th largest investing bank, the Lehman Brothers convulsed universe markets and wrecked the lucks of millionaire moneymans. They had incurred losingss of one million millions of dollars in the US mortgage market. The destiny of the 158 old ages old investing bank, which dates back to 1850 prior to the civil war was decided, it was non sealed in the council chamber of gaudy Manhattan central office but was done in the glooming Grey edifice of the New York Federal Reserve, the Wall Street subdivision of the US Central bank. At 1 am on 15 September, 2008 the bank announced that it would register for Chapter 11 Bankruptcy protection.

The company had its IPO in 1994 which had increased its grosss every bit good as employees who grew from 8500 to 28000 about. In the twelvemonth 2008 in the second one-fourth the house had $ 2.8 billion in losingss and was forced to neutralize $ 6 billion in assets. The stock motion of the house in that period:

Lehman ‘s US concern was taken over by Britain ‘s Barclay ‘s Bank and the pandemonium sing the destiny of the employees cropped up. It was stated that 9000 Lehman occupations could be saved because of the acquisition. Even though the trade between Barclays and Lehman was non successful at the first spell, but it struck fleetly a few yearss subsequently. Therefore the amalgamation between Barclays Capital and Lehman Brothers Inc. had a worthwhile trade for Barclays which was deserving $ 1.75 billion.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

The employees of Lehman were absorbed in U.S and London office. Most of them left their parent company and the 1s who were absorbed were loath about working in the new environment. Barclays had to cover with hard determinations like layoffs, keeping, publicity of former Lehman and current Barclays employees. The issue which was impacting both the administrations was of the Organisational Behaviour in context of Human resource Management, Communication and single and cultural differences. This is the point when the Human Resource Department is entirely responsible for colony in the new employees and to do their bing employees work in co-ordination with the new employees.

Amalgamations and Acquisitions are en trend today. The initial phases of Amalgamations and Acquisitions seems to be characterized with high hopes, elation about the trade, media attending etc. but the long term world is different. The key to a successful amalgamation is the post-merger direction administration to whether the direction is able to incorporate the people to work in co-operation with each other to gain the corporate ends of the administration.

CHALLENGES FACED BY THE MANAGEMENT

“ The cardinal differences between acquisition success and failure prevarication in apprehension and better pull offing the procedures by which acquisitions/decisions are made and by which they are integrated. ”

Haspeslagh and Jemison

The human resource directors play a important function in Merger and acquisition in order to increase the opportunities of success of the trade. The booby traps which can be avoided by the HR squad are Employment jurisprudence challenges, Cultural clangs, Talent keeping and Employee battle. They have to be certain that the acquired house blends good with the bing house because if they both do non intermix good the differences will do hegira of endowment. The challenges faced are:

Retention of Endowment

Deputation of Authority and Roles

Co-ordination and Communication

Pull offing Individual Differences

Integration of Corporate Cultures

Wages Policy

Postmerger integrating has long been treated as an art. While there are facets of the trade and subsequent executing that doubtless will profit from the deft touch of a gifted leading squad, it ne’er hurts to cognize the odds.

Retention of Endowment

At the clip of Merger and acquisition the employees of the company are hesitating about their place in the new administration. They are unsure about their hereafter chances in the administration. They are even pessimist about the administration civilization they are traveling to cover with in the close hereafter. They even have a surviving guilt due to the retrenchment of the other employees and have already construct a perceptual experience in their head that there would be increased emphasis and work load. Therefore, we can state that it becomes hard for the HR squad to retain the endowment in the administration.

In instance of Barclays and Lehman Brothers the job was that Barclays was non a celebrated investing bank whereas Lehman had an established name in investing banking. When the amalgamation took topographic point it lead to eroding of gifted employees from the parent company and even after the amalgamation Barclays was on the losing terminal in context of gifted employees who are considered as an plus for the house. Lehman ‘s bankers were hired by Barclays to be in charge of the freshly incorporated entity, for illustration, few of the maintained Lehman employees were the former president and caput of communications M & A ; A ; pull offing manager to consumer merchandises companies ; pull offing manager and planetary co-head of fiscal establishments ; caput of industrial M & A ; A ; caput of natural resources M & A ; A ; caput of existent estate ; and caput of engineering M & A ; A. Barclays had besides set aside $ 2.5 billion used for ruptures which was to be used as cutting cost associated with cutting of about 5000 occupations or less depending on the wage degree of the people involved. The keeping inducement that was decided by Barclays was merely a key to construct a span to reconstruct employees trust but this does non ensue in long term trust. The keeping inducements which are paid to the employees merely create a impermanent stableness.

It is really of import to maintain employee turnover low because

Business continuity is the key to recognizing the benefits of a Merger or Acquisition.

There can be big fiscal deductions from the cost of engaging new employees, the loss of knowledge/intellectual capital, and the loss of client relationships.

Therefore it is really of import for the administration to keep and recover employee trust in order to maintain them on board as this would assist cut down the turnover during the Merger and Acquisition.

Deputation of Authority and Roles

The deputation of functions and responsibilities to the new employees is another hard occupation for the HR directors. It is really of import to depute the right function to the right individual in context to organizational ends. It becomes really hard for the bing every bit good as new employees to specify their functions after a amalgamation because the cardinal inquiry is “ where do they suit in? ” and it becomes hard for the HR squad to reply this. If the functions and duties are non defined decently it leads to even more troubles. The three station amalgamation mentalities which affect the employees about other employees are:

“ The Ready ” these are the of all time ready and the aroused employees with positive attitude but are considered as treasonists by other employees.

“ The Wanting ” these are the employees who do non acquire the place which they are looking for and acquire stuck in between. They need clip to believe what they want following.

“ The Wrung out ” these are the most negative employees and see each alteration for the worst and may or may non execute their responsibilities.

Sometimes there is a job of extra places, where for a individual place there would be multiple endowments available. For the same place the employee of the acquired company is besides working and the employee of the current company is besides positioned. In this state of affairs it becomes hard for the HR director to explicate the place and function to both the employees.

This scenario was besides stated in instance of Barclays and Lehman Brothers as they were covering with the convergence of places between the two and they were happening it hard to place the best 1 for the place.

Communication

These are the two most indispensable elements in the smooth operation of the administration. Communicating the right manner with the employees and co-ordinating well with them to transport on the concern activities is the most indispensable undertaking of the Human Resource Management of the house. The communicating spread can be risky for smooth integrating of both the houses. The new employees being foreign to the geting house experience the vacillation to pass on with everyone. The bing communicating civilization in the administration acts as a menace in the integrating of both the administrations. The pass oning manner can be either formal or informal. Sometimes the communicating is at that place but it lacks information and substances to back up the information. Whatever has to be communicated it should be true, unfastened and timely. Sometimes these struggles of communicating and co-ordination arise due to personality and ego and non because of state of affairss. Each administration should hold its genre repertory that gives information as to how the administration manages its communicative patterns and activities.

In instance of Barclays and Lehman Brothers the hostile attitude developed in the employees of both the houses. The ambiance had more of “ them ” than “ us ” . They were loath to work in squads with each other and had an inexorable attitude towards each other which led to haltering the growing of the new administration.

Pull offing Individual Differences

Individual differences are the culprit of station amalgamation and acquisitions struggles. Peoples belong to different cultural beginning have different personality traits and attitudes. This difference affects them in accommodating themselves to the new work civilization and the administration as a whole. The factor of single difference leads to resentment amongst the employees and lead to negative public presentation. This factor becomes even murkier when the employees feel discriminated due to conflicting direction and organizational attack. This can be handled by transfusing a positive mentality amongst the employees by the top direction and the human resource directors.

Integration of Corporate Cultures

During a amalgamation there is an integrating of two different administrations which lead to integrating of two different civilizations wholly. In this instance the technique of integrating was the “ ABSORPTION APPROACH. ” By and large, this is neglected by the direction at the clip of integrating. Culture here is of import because it binds persons and creates organizational coherence. Even in the some industry two administrations tend to hold different civilizations. The corporate civilization concerns symbols, values, political orientations and premises which operate in an unconscious manner to steer single and concern behavior. It is profoundly embedded in the administration and in the behavior of the people. This can be described in one sentence

“ the manner we do things around here. ”

The integrating of civilization between two discrete and rival work forces and their organizational civilization is hard. Is can be described as what personality is to single, civilization is to organisation but civilization tantrum and civilization compatibility is an frequently used term but is non defined decently. The redresss could be developing a new civilization wholly. Every individual goes through the below mentioned phases in footings of civilization in a amalgamation.

Valuess are unseeable cultural regulations. At this clip what is of import is to hold a vision and doing everyone articulation that vision. Merely the creative activity of new civilization can convey about true alterations and this can be done by holding representatives who can be honest to the new civilization and can be relied upon. They should be able to take expeditiously on both sides of the cultural divide. They should be more of function theoretical accounts who can convey together everyone and assist them accommodate to the new civilization.

Wages Policy

Wagess play a important function in prosecuting the employees. Not merely the extrinsic wagess but the intrinsic value of wagess is besides indispensable. Realigning the scheme and design of wagess is imperative for amalgamation companies but the reward policies should non be biased toward the employees of the geting house. The term employee wagess must be regarded as a dynamic field and at that place has to be a systematic and digesting influence in the linkage between wages and public presentation. The policy should be appealing for employees of both the houses. The employees should be made clear of the fact that hoe the wages policy will work and how effectual it would be. The wages policy should be aligned with the ends of the house in order to achieve a victorious place. If the wages policy is non aligned good with the company ‘s schemes than the impact of this on the concern would be counterproductive and it would be complete waste of resources.

Analysis OF THE MERGER DECISION

The analysis would be done of Barclays and Lehman Brothers amalgamation and the determination of the amalgamation will be discussed. The deductions the challenges had on the amalgamation would besides be discussed.

Nine months before the trade was finalised Barclays and Lehman were bosom brothers, but subsequently they were in an unfastened warfare in the cozy confines of the bankruptcy tribunal. Whether the amalgamation was a success or non would be discussed in ulterior portion on the footing of 3 C ‘s

Culture

Change

Conflict

Culture

Culture differences are used as accounts to organizational jobs in a amalgamation. This civilization can act upon people to put their professional and personnel ends. Either the companies form a new civilization wholly or take the strongest points of both the civilizations. Having a new civilization raw is about impossible because within an administration itself there are a figure of civilizations predominating and altering them all is following to impossible. Besides civilization includes single and administration beliefs and values. A good designed program for the direction of the cultural alterations is a critical factor of success.

In instance of Barclays and Lehman Brothers the job was non merely organizational civilization but it besides comprised of national civilization. Barclays had a pure British civilization whereas Lehman Brothers was a difficult nucleus U.S civilization entity. Barclays had to non merely incorporate the company ‘s civilization but besides work upon the national civilization. Few other illustrations of national civilization integrating are: Doosan and Bobcat, Lloyds and HBOS, Citigroup and Wachovia and many more. Lehman had been successful over the old ages and might hold had appositional civilization within the administration but due to the bankruptcy set back the positive and healthy civilization would besides hold been shattered. What Barclays wanted to follow was how a individual can larn to accommodate to the procedures and precedences and how a individual can be persuaded to follow the paradigm behavior of leaders in the administration. Barclays understood the importance of the ailment effects created due to the cultural clangs and decided to assist Lehman Brothers employees in accommodating themselves to the common new civilization station amalgamation.

Barclays has besides identified 200 employees “ that have been designated as cardinal to the success of the concern, ” harmonizing to the filing.

The first 90 yearss were really important for Barclays as it had decided to keep on all 10,000 employees of Lehman in U.S or agreed to pay them 20 % fillip of their last twelvemonth ‘s wage. It was besides stated that the employees who do remain back were to have the fillip sum of 2008 which Lehman had already set aside for them before the acquisition. This clearly states that Barclays had ne’er wholly ignored the Lehman civilization and alternatively retained their staff to incorporate a common and new organizational civilization. This insured that the staffs of Lehman brothers were non in any fortunes dominated by Barclays civilization and a positive civilization in the long tally was maintained.

Change

Change is an ineluctable portion in the life of any administration. The alterations can convey both advantages every bit good as disadvantages for the house. The opposition to alter is non in favor of the house. The opposition to alter post amalgamation can be due to a figure of grounds. Few are:

Fear of occupation loss

Change to societal construction

Changes in working forms

Loss of place

There were a figure of alterations brought by amalgamation of Barclays and Lehman Brothers. The alterations were in footings of national civilization, corporate civilization, different working manners, different values and perceptual experiences of the employees. A figure of persons were involved in the trade hence credence of alterations was more of a challenge for the Human Resource Management squad as it challenged the perceptual experience of employees of both the administrations. Both employees had their ain perceptual experiences and attack towards work that suited their ain administration civilization. Post amalgamation the employees of Lehman Brothers had the quandary of “ What will go on next? ” and the results if they were fired from their places or made to work in unsatisfactory fortunes. They were even loath to alterations because they were non certain of the fact that what would be their hereafter and what sort of response they would have in the new administration. The lone redress to this would the enterprise from Barclays direction squad. The direction should take enterprise to supply a sense of security to the employees and do the organizational ends clear to them and besides modify their company ‘s scheme to do Lehman ‘s employees comfortable instead than enforcing themselves on them.

The alteration was besides hard for the employees of Barclays PLC as even they had to accommodate themselves harmonizing to the new organizational civilization and work in equal groups with the employees of Lehman even if they were non comfy making so. They had to do accommodations with the regulations of the new direction squads formulated and even had a quandary that would their places be affected every bit good post amalgamation. But their fear degree was less and could be easy managed by the direction as they had the ruling place in the new administration and the fright of their occupation loss was negligent.

Conflict

“ Conflict Leads to Cooperation in Nash Bargaining ” Conflict can be designed as clang between two persons or administrations. It is considered as the disfunction result and tends to be associated with negative state of affairss which result in inefficiency and uneffective consequences. Every administration faces struggles at the clip of amalgamation and even otherwise. These struggles can be between persons or even between different sections or working groups. These have to be managed with a will to pull out something utile out of it. The struggles if handled professionally can take to positive results. The leaders of the company or the squads frequently lead to larger struggles within the administration, for illustration one executive may favor one redress manner to a job whereas the other would propose something different and it would take to a struggle between the working groups of both.

Sing the instance of Barclays and Lehman Brothers it was quiet expected that there would be a struggle between the two because both the administrations were large fishes in their ain industry and anticipating a via media from either was out of inquiry. It was amalgamation of two wholly different civilizations hence if it would non hold been handled good it would hold ruined the trade. Lehman had a really informal as it is in the U.S whereas Barclays had a perfect U.K working civilization which was formal. Having a struggle at the initial phases was something which Barclays would hold neither expected nor would hold been able to cover with. They managed doing clear communicating with the direction of Lehman Brothers and in order to maintain a cheque on the state of affairss taking to conflict, they hired around 200 bing staff from Lehman brothers to keep cardinal place in their administration. This made sure that the world cheques were conducted on and off and the staffs were retained non merely for doing the Numberss but were regarded as factors for future success of the administration. The frights of employees of Lehman Brothers at the initial phase were that they would be laid away from their occupations post amalgamation but Barclays made certain that they were retained and the integrating would take topographic point at the right note in order to avoid all the struggles. This made everyone work towards accomplishing the common ends of the administration.

To reason we can province that the struggle direction of Barclays PLC was efficient and effectual, the communicating was appropriate and the aims of the administrations were clearly corresponded to the employees in order to accomplish the ends and have smooth operation of the administration. The human resource direction squad of Barclays handled the state of affairs good and were effectual in their planning and execution.

Decision

Post amalgamation it was said that “ This is about excessively good to be true. ” While companies were looking at deriving their planetary aspirations during the clip of recession, Barclays had already gained a bigger bridgehead. The amalgamation of Barclays PLC and Lehman Brothers saved legion occupations and helped economic systems of both the states. For most of them it was an aggressive determination but during the extremum of the recession period this might be the wisest move of all time. The direction of Barclays could be termed as argus-eyed acquirers, long-standing scheme minds and enterprisers with immense programs. Whether they were able to endeavor through this is the inquiry.

In instance of Barclays and Lehman Brothers the leading on portion of Barclays was endeavoring and end oriented as they wanted to interrupt through the U.S fiscal markets. There were few booby traps on portion of Human Resource section of Barclays as they could non manage the redundancies good which in the ulterior phase affected the stocks of Barclays merely four months after the amalgamation was executed.

The 1s who were in bigger quandary were the stakeholders of the administration. It was hard for them to analyze the degree of hazard involved post amalgamation. For them it was a amalgamation of two companies with different holistic attacks all together which could take to struggles within the administration and might ensue in the failure of the amalgamation in the long tally. The clip in which the trade was executed was when the recession was at its extremum and the sum of capital invested at that clip was immense. Though the trade in existent footings was done at peanut monetary values as compared to what it had been in normal fortunes. The fright was of mass hegira of capableness within the administration or alteration of employees which would non be considered advantageous for the house in the long tally. In context of integrating issue Barclays could hold implemented an extra concern program in order to reenforce the integrating of the investing banking division. If the integrating could hold been worked good upon than the booby traps the company had faced recently would hold minimised vastly.

At present a instance has been filed by Lehman Brothers against Barclays PLC saying that Barclays had managed acquiring a price reduction of $ 5 billion during the trade. The engagement of Lehman employees is besides suspected in this trade. The direction of Barclays PLC claims that the trade was honest and no marks of un-professionalism existed at the clip of the trade. Therefore, we can reason by stating that there is still a batch to come from this- trade of the century.

.

x

Hi!
I'm Amanda

Would you like to get a custom essay? How about receiving a customized one?

Check it out