Taking on Lehman Brothers’ Asia-Pacific and EMEA divisions to become a global investment bank (2008)

What it means for a Japanese company to run a Western-style investment bank

What makes this acquisition interesting is the audacity of reading a crisis as an opening. With financial institutions everywhere contracting, Nomura absorbed in one movement the human network of a fallen name and staked itself on the transformation into global-scale wholesale that Japanese securities firms had wanted for decades. Winning the contest for talent rather than for plant or capital went to the heart of the trade: the value of an investment bank resides in its people. There was a particular speed in the poise of it — acquiring in a few days’ decision a roster it would have taken ten years to build — the speed available only to those able to move in the middle of a crisis.

But what it took on was not only talent. The gap in decision-making speed between ex-Lehman staff and the Tokyo head office, the friction over pay structures, the drag of a fixed-income business becalmed by falling rates — all of it arrived with the roster. The high compensation it guaranteed pushed up the breakeven point and left an earnings structure in which what the domestic retail branches make can be cancelled out by a single overseas loss. Two annual losses in ten years reflect the difficulty of the model itself: a Japanese company running a Western-style investment bank. Even so, the Asia-Pacific footing the deal produced remains the skeleton of Nomura’s overseas business. More than a decade on, the answer to that difficult question is still not settled.