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Case from journal
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Reference no. NAC3215
Authors: Randall D Harris
Published by: NACRA - North American Case Research Association
Published in: "The Case Research Journal", 2012
Length: 22 pages
Data source: Field research

Abstract

This case details the desperate negotiations in September of 2008 to prevent the failure of the New York investment bank Lehman Brothers. Following the collapse of the US subprime mortgage market in February of 2007, a downturn in the global financial markets began to accelerate. Lehman Brothers, heavily exposed to the US subprime and commercial real estate markets, began to experience increasing levels of distress. Looking for a merger to save the company, Chairman of the Board and Chief Executive Officer Richard 'Dick' Fuld began to actively seek a buyer for the company. Actively rebuffed by several potential suitors, Fuld instructed his attorney to approach Bank of America about a deal. Negotiations between Lehman Brothers and Bank of America ensued and were encouraged by US government officials. Talks between Lehman and Bank of America failed. After conversations with Barclays Bank about a bid for Lehman also stalled, Dick Fuld was isolated from the discussion and US government officials began to actively manage the negotiations regarding the fate of Lehman Brothers. In a critical moment, UK financial authorities balked at a proposed deal to save Lehman. The Lehman Brothers board of directors was actively monitoring these negotiations and met four times over the weekend of September 13th and 14th. During the fourth meeting, a US government official addressed the board and stated that a Lehman Brothers bankruptcy would be in the best interest of the nation. The Lehman Brothers board was now faced with a stunning dilemma: whether to further stall for time, vote against the expressed wishes of US government officials, or acquiesce to the bankruptcy of the company.
Location:
Industry:
Other setting(s):
2008

About

Abstract

This case details the desperate negotiations in September of 2008 to prevent the failure of the New York investment bank Lehman Brothers. Following the collapse of the US subprime mortgage market in February of 2007, a downturn in the global financial markets began to accelerate. Lehman Brothers, heavily exposed to the US subprime and commercial real estate markets, began to experience increasing levels of distress. Looking for a merger to save the company, Chairman of the Board and Chief Executive Officer Richard 'Dick' Fuld began to actively seek a buyer for the company. Actively rebuffed by several potential suitors, Fuld instructed his attorney to approach Bank of America about a deal. Negotiations between Lehman Brothers and Bank of America ensued and were encouraged by US government officials. Talks between Lehman and Bank of America failed. After conversations with Barclays Bank about a bid for Lehman also stalled, Dick Fuld was isolated from the discussion and US government officials began to actively manage the negotiations regarding the fate of Lehman Brothers. In a critical moment, UK financial authorities balked at a proposed deal to save Lehman. The Lehman Brothers board of directors was actively monitoring these negotiations and met four times over the weekend of September 13th and 14th. During the fourth meeting, a US government official addressed the board and stated that a Lehman Brothers bankruptcy would be in the best interest of the nation. The Lehman Brothers board was now faced with a stunning dilemma: whether to further stall for time, vote against the expressed wishes of US government officials, or acquiesce to the bankruptcy of the company.

Settings

Location:
Industry:
Other setting(s):
2008

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