The marriage was hastily planned, and the dowry was arranged in bankruptcy court.
But Barclays PLC, united on a fateful weekend in September with the investment banking and trading operations of Lehman Brothers, is still beaming like a newlywed.
It would seem there is much to beam about. The acquisition gave Barclays an important new foothold in equity trading, merger advising and other businesses that the British company had exited a decade earlier, when it decided it was too small to compete effectively.
In U.S. fixed income, a business where Barclays already was a powerful but quiet player, the company used Lehman's expertise in niche products to fill holes, and it pulled out costs where business lines overlapped.
The resulting growth in investment banking earnings helped Barclays absorb continued credit market writedowns and sharp loan impairments in the first quarter.
Companywide profits rose 14% from a year earlier, Barclays said Thursday. In the investment banking division, known as Barclays Capital and based in Lehman's former midtown Manhattan headquarters, pretax profits more than quadrupled.
"This, together with good cost control, has enabled us to shield the anticipated increase in impairment and absorb further credit market writedowns on legacy assets," said John Varley, group chief executive for Barclays.
But numbers are only one way to measure the success of an integration, particularly one involving the peculiar cultural mores and outsized egos of Wall Street. Compared with Bank of America Corp.'s marriage to Merrill Lynch & Co., which the buyer wanted annulled before the deal was even consummated, the Barclays-Lehman combination has gone as smoothly as one could hope.
"I don't think anybody on Wall Street has achieved an integration as quickly or as easily with anyone else as we have," said Jerry del Missier, the president of Barclays Capital. "Aside from the financial performance, what makes us feel very good is just how the franchise continued to develop."
In picking a Wall Street bride, Barclays had advantages that its competitors did not.
Unlike JPMorgan Chase & Co., which swooped in to rescue Bear Stearns Cos. during a frenzied period early in the credit crisis, Barclays had the luxury of time to think about how a potential acquisition might fit into its business.
As soon as Bear Stearns faltered, del Missier said, Barclays Capital began mapping out its options in the event that a similar takeover opportunity presented itself.
And unlike B of A's purchase of Merrill — which needed shareholder approval and other red-tape measures before the closing of an agreement reached the same weekend as the Barclays-Lehman Brothers one — Barclays benefited from the expediency of bankruptcy court and a regulatory imperative to create a smooth transfer of customer assets.
That allowed Barclays to start bringing Lehman employees into the fold immediately, taking away some of the uncertainty that has proven to be a distraction at B of A and Merrill.
"People are looking for direction in this environment, and we just wanted to move quickly and get people focused," del Missier said.
Barclays Capital had never made an acquisition that big before. But it did have some experience in managing growth.
In the decade before the Lehman acquisition, the investment bank had built up its head count from 4,000 to 16,000. Now it has 20,000 employees, including more than 9,000 based in New York. Also, Barclays Capital never had as high a profile in the United States as Goldman Sachs Group or Morgan Stanley, but it is a major player globally in foreign exchange and commodities trading, and it is known for fixed-income trading.
One reason for the low profile is that throughout its expansion in the United States, Barclays purposefully avoided hiring big-name Wall Street stars — an outgrowth of what del Missier refers to as his firm's "no-jerk" rule.
"I would define our culture over the years more by the people we didn't bring into the business than the people we did," he said.
Barclays Capital has no executive floor; del Missier sits with his troops, offering a level of accessibility that he said helped to make the former Lehman employees more comfortable with their new employers.
"It's representative of the fact that we started this business back in 1997 with a small core and very much an underdog mind-set," del Missier said.
He says he is not worried by predictions that activity on Wall Street will remain below its 2007 peak for several years, perhaps sticking to levels seen in 2004 or 2005.
"I seem to recall that those were pretty good years, actually," he said. "And now there are six large banks on Wall Street competing instead of 15. Tell me what about that isn't a good business."
