The Challenges of Cross-Border Mergers: A Case Study of Nomura's Acquisition of Lehman's Internation

It’s not always easy to do business globally, as executives at Japanese brokerage firm Nomura Holdings Inc. are discovering.91 Nomura acquired Lehman’s international operations in late 2008 after the U.S.-based investment bank filed for bankruptcy protection during the Global Financial Crisis—an action that added about 8000 non-Japanese workers. For Nomura, the time seemed right to strengthen its global expansion strategy. However, since the acquisition, cultural and business differences between the two organizations have been a major stumbling block. Although blending two diverse cultures requires intentional efforts when different organizations merge or are acquired, it’s particularly challenging when the key assets in the cross-border acquisition are the people employed by the organization being acquired.

Workplace tensions arose over executive compensation, how quickly decisions were made, and how women were treated. For instance, during Nomura’s initial training session for new hires, the men and women were separated. The women—many of whom had earned degrees from prestigious universities such as Harvard—were instructed on how to wear their hair, serve tea, and choose their clothing according to the season. The company’s dress code for women was also strictly interpreted. Women from Lehman were told to remove highlights from their hair, to wear sleeves no shorter than mid-bicep, and to avoid brightly colored clothing. Several women were sent home from the trading floor for dressing “inappropriately.” One said, “I was sent home for wearing a short-sleeve dress, even though I was wearing a jacket.” A Nomura spokesperson said, “The dress code is displayed on the company’s intranet and is intended to ensure that clients and colleagues don’t feel uncomfortable.”

Lehman bankers also said they found the process for getting approval on deals was “slower and more difficult than it was at Lehman.” Also, at Lehman, clients were categorized, in large part, by the fees they paid. At Nomura, more emphasis was placed on other factors, such as the length of the relationship. The bankers at Nomura said that “their new colleagues were too willing to dump loyal clients for a quick profit.”

In its defence, Nomura has tried to blend the two cultures. In offices in Europe and in Asia outside Japan, there’s a mix of nationalities. Also, the company has promoted a handful of non-Japanese employees to high-ranking positions. “To reduce the Tokyo-centric nature of the company, Hiromi Yamaji, head of global investment banking, moved to London, and Naoki Matsuba, global head of equities, moved to New York.” Until March 2010, Nomura’s executive committee was all Japanese men. However, in an attempt to make the company more globally oriented, an ex-Lehman executive and foreigner, Jasjit “Jesse” Bhattal, a native of India, was promoted to the committee. Nomura’s deputy president and chief operating officer, Takumi Shibata, said, “When your business is global, management needs to be global.” Two years later, unable to garner support from Tokyo for an overhaul of the global wholesale-banking operations, however, Bhattal resigned as Nomura’s highest-ranking foreign executive. Nomura has continued its retreat from international markets, announcing its closure of its European equities division in 2016.92

Discussion Questions

1. What obvious cultural differences between Nomura and Lehman do you see in this situation?

2. What global attitude do you think characterizes Nomura? Be specific in your description. Do you see any evidence of that changing?