This is a fascinating but complex case that covers Barclays’ acquisition of the U.S. operating assets of Lehman Brothers. The case provides background information on the collapse of the sub-prime mortgage market and its effect on firms such as Bear Stearns, Citigroup, Merrill Lynch, AIG, Fannie Mae, and Freddie Mac. The case then describes Barclays’ emergency acquisition of Lehman Brothers over a few days time, including the note that describes how Barclays’ recorded the acquisition of Lehman Brothers. For comparison purposes, that note is followed by notes that describe how JP Morgan recorded its acquisitions of Bear Stearns, Washington Mutual Bank, and Bank One. From those four notes, students can argue that Barclays obtained Lehman for as much as $10-$20 billion below its fair value.
On the other hand, at the time there were only four financial institutions in the world that might have been capable of acquiring Lehman Brothers: Barclays, J.P. Morgan, BankAmerica, and Wells Fargo Bank. J.P. Morgan was acquiring Washington Mutual, BankAmerica was acquiring Merrill Lynch, and Wells Fargo Bank was acquiring Wachovia and all three of those acquired firms were in serious financial difficulty.
The case then considers a lawsuit filed by Lehman Brothers charging Barclays with fraud in its acquisition of Lehman Brothers. The claims seem to indicate that Barclays did engage in fraud. However, the lawsuit also includes Barclays’ response, which seems to contradict everything in the Lehman lawsuit.
Both the business combination reporting and the lawsuit are complex but interesting. The case can also include Deposition of Harvey R. Miller Examination by David M. Boies (Chapter 4) as background reading. Mr. Miller is one of the nation’s two leading bankruptcy and restructuring attorneys whereas Mr. Boies is perhaps the leading U.S. corporate litigator. Many students will be deposed in their careers. This is one of the most vigilantly crafted and penetrating set of questions and one of the most careful and precise set of responses a reader is ever likely to encounter.