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Finance · Profile from Finance Research Companion

Lehman Brothers Holdings Inc.

A 158-year-old firm that began as a dry-goods and cotton business in Montgomery, Alabama, became one of Wall Street's great partnership banks, was sold to American Express in 1984 and spun off again in 1994, then under Dick Fuld grew into the fourth-largest US investment bank on a balance sheet of mortgages, commercial real estate and leveraged loans funded overnight. Its Chapter 11 filing on September 15, 2008, with ~$639bn of reported assets, is still the largest bankruptcy in US history. It was the event that turned a credit crisis into a global panic, and its estate has spent more than seventeen years paying creditors back.

At a glance

Founded
1844 (Henry Lehman's store in Montgomery, Alabama); "Lehman Brothers" from 1850, when Mayer Lehman joined Henry and Emanuel
Founders
Henry, Emanuel and Mayer Lehman, immigrants from Rimpar, Bavaria
Headquarters
New York (World Financial Center until 2001; 745 Seventh Avenue from 2001–02)
Ownership / structure
Partnership until 1984; part of Shearson Lehman / American Express 1984–94; NYSE-listed public company (LEH) from May 1994 to September 2008; since 2012 an estate run by the Lehman Brothers Holdings Inc. (LBHI) Plan Trust
Leadership (at failure)
Richard S. "Dick" Fuld Jr., chairman and CEO (1994–2008); Joseph Gregory, president and COO (to June 2008); Herbert "Bart" McDade, president from June 2008; Erin Callan, then Ian Lowitt, CFO
Segment
Investment bank and broker-dealer: fixed income and equities sales and trading, investment banking, principal investing, and investment management (Neuberger Berman)
Scale at peak
Total assets ~$691bn at November 30, 2007; ~28,600 employees (reported); record fiscal 2007 net revenue ~$19.3bn and net income ~$4.2bn (company results, reported)
Leverage
Gross leverage ~30.7x at fiscal year-end 2007; "net leverage" as Lehman defined it ~16.1x (reported)
Failure
LBHI filed Chapter 11 on September 15, 2008 with ~$639bn of assets and ~$613bn of debts (reported); the broker-dealer Lehman Brothers Inc. (LBI) went into SIPA liquidation on September 19; Lehman Brothers International (Europe) (LBIE) entered UK administration on September 15
Aftermath
Barclays bought the US business (~$1.75bn, including headquarters and data centres); Nomura bought the Asia-Pacific and European/Middle East franchises; LBHI plan effective March 6, 2012; ~$129.5bn distributed to creditors through the 32nd distribution in April 2026 (reported, verify)

9 strategic moves analysed

Each one gets a full strategy file in the companion: context, the decision, the financing, what happened, and the lesson.

  1. 1850

    Founding Cotton Merchants

    Founding

  2. 1984

    Sale to Shearson American Express

    Acquisition (Lehman as target)

  3. 1994

    Spin Off from American Express

    Spin-off / listing

  4. 2003

    Neuberger Berman Acquisition

    Acquisition

  5. 2006

    Commercial Real Estate and Archstone Bet

    Pivot (to principal investing) / acquisition (Archstone-Smith buyout)

  6. 2008

    Capital Raises and Failed Rescue Talks

    Funding round (equity raises) / failed sale

  7. 2008

    Chapter 11 and Barclays Nomura Sales

    Bankruptcy / divestiture

  8. 2008

    Repo 105 Balance Sheet Window Dressing

    Accounting and funding practice (failure / conduct)

  9. 2012

    Estate Plan and Creditor Recoveries

    Bankruptcy resolution (plan of reorganisation/liquidation and distributions)