Mark Butterfield, CIO of Nomura for Europe, the Middle East and Africa

When Nomura acquired a chunk of Lehman Brothers' crumbling empire last year, the brunt of the integeration process fell into the hands of the IT team, which completed the challenging task in a matter of weeks. Writer Michelle Price

Behind each headline-grabbing merger and acquisition to emerge from the global financial crisis sits an oft-overlooked and frequently overworked IT team. In an industry defined by its IT capability, it is the IT team that determines the fate of many a mega-merger.

Nowhere has the IT team proved more critical, however, than in the case of Nomura: the bank's landmark acquisition of Lehman Brothers' European and Middle Eastern equities and investment banking operations and its entire Asia franchise, in a hectic flurry in October 2008, saw the Japanese bank pick up a raft of hyper-sophisticated IT. Indeed, Lehman's industry-leading technology assets made the deal highly appealing for Nomura, but it also meant that any attempt to acquire the firm would have to satisfy a single question: could the technical integration be successfully achieved in the necessary timeframe?

Delivering the final verdict on this vital question fell to Mark Butterfield, CIO of Nomura for Europe, the Middle East and Africa. "The technology was fundamental: without the technology, the acquisition probably wouldn't work;' he says. But in the chaotic days following Lehman's collapse, time was short: an assessment had to be made very quickly. On the Friday following Lehman's collapse, Mr Butterfield pulled together a team and began preparing for a weekend of meetings with the Lehman staff and the administrators from PricewaterhouseCoopers (PwC). On the Saturday, the Nomura team began to get to grips with mapping the mammoth investment bank's IT infrastructure.

Under any circumstances, acquiring a firm as vast and as complex as Lehman would have been a tricky proposition. But the added complexities of PwC's ongoing obligation to run down the failed business created a challenge of staggering detail and intricacy, says Mr Butterfield. "We had to have a clear view of what that meant: was it possible for us to interconnect and reconnect all these businesses to get back into the markets? And how do we do that and separate ourselves from PwC?" Added to this was Barclays Capital's acquisition of the US business, which was largely supported by a global, rather than localised, infrastructure base. And, there was the Asia part of the puzzle to consider too. Mr Butterfield presented his conclusions to the executive management team on the Sunday. "We felt that the platforms were strong enough and structured enough for us to bring them back up and plug them into a Nomura world. From a PwC and BarCap segregation perspective, there was work to do, but we felt it was feasible. So the recommendation was that yes, it was possible." At some point on Sunday morning, the executive team in Japan determined to go ahead. On the Tuesday, the news was issued to the world.

Eyes on the prize

At this point, all eyes were on the technology team. Nomura had taken on thousands of Lehman's staff globally while the acquired bank's revenue streams were frozen. This made speed of resumption critical: while the IT team went to work reviving the trading platforms, costs were flowing out of the door.

"There was huge pressure on everyone across the whole firm, but very specifically, technology," says Mr Butterfield. "There were a lot of traders sitting out there all waiting for the IT team to make things happen."

Instead of months and years, the team had just weeks to make the deal a success, with some 45 specific business streams awaiting resumption in the first instance.

The acquisition of such a global player also radically transformed Nomura's regional operating model into a global one, with the European equities team becoming the global infrastructure vehicle for all client facing business. This meant that not only was the European business dependent on the speed and success of the European integration, but the Asian business was too.

The first and foremost decision that Mr Butterfield and his team had to make was on the integration strategy. Many systems, such as the web-based functions supported by Lehman's US team, were lost in the acquisition process, which meant that attempting to fully resurrect the Lehman environment was unfeasible. For compliance and risk-control reasons, it became clear that the cleanest and quickest strategy would be to leverage the best ofthe Lehman systems and integrate those into the Nomura environment. Critically, the Nomura team opted to use its own middle and back-office platforms for the equity and fixed-income environment. "We felt this was the quickest way," says Mr Butterfield. "We needed to come up with a robust solution that would get the business up and running in the short to medium term:' But this strategy meant matching the scale of the Lehman front-office platforms: the Nomura platform's capacity to process and settle about 25,000 trades a day was dwarfed by the high-octane Lehman environment.

"The Nomura processing environment was robust, but it just didn't have the volume going through it. Conceptually it was designed to be able to scale, but we'd never needed to do it," says Mr Butterfield.

By the end of January, the bank had scaled up the Nomura middle and back-office capacity to 180,000 trades a day for settlement - and still counting. Within a month of Lehman's collapse, the IT team had the bank's major systems back up and running. By the middle of November, the team had begun testing on the newly integrated equities trading platform and by early December the equities team began live trading on some of Lehman's principle cash and programme trading platforms. Initially, says Mr Butterfield, the team executed low volumes with a minimal number of "friendly" clients. By January, the bank had completed 95% of the platform reintegration. In total, the team connected 185 Lehman systems into the Nomura environment and redeveloped or added more than 40 systems, as well as linking-up the Asia systems to the European platforms.

Rattling through

If there is a single determining philosophy that has proven central to the bank's integration efforts, it is the invocation to "just go for it", says Mr Butterfield. "There are so many decisions that you just have to rattle through them." In many respects, Nomura was in a fortunate position: it had. no choice but to effect integration - and fast. The very life of the business depended on it. In other circumstances, a lack of perceived urgency has often frustrated and, in dire cases, ultimately killed the integration process.

For this reason, few market watchers predicted a happy ending and many viewed the scale and complexity of the task with intense scepticism. But this provided a strong incentive to make the integration a success, says Mr Butterfield. "There was a huge desire in the firm to show that we could do it: the focus was staggering." More than a little friendly rivalry between the Nomura team and Barclays Capital has also proved uniquely motivational.

In its first quarter results, unveiled in July, Nomura was able to deliver a satisfying riposte to the doubters: Nomura Securities reported net profits of ¥29.9bn ($316.2m), backed by strong commissions in the brokerage business, in particular equities and fixed income. While the results reflected a general upswing in the markets, the firm's capacity to process the boom in trade flows testifies to the IT team's achievements. Most notably, Nomura Securities has leapt from being the 82nd player on the London Stock Exchange, in terms of value and volume of shares traded, to number one.

But the work is not over, says Mr Butterfield. "There is probably more to do now than at the start." The Nomura business teams harbour big ambitions which translate into a lengthy IT project pipeline: as of mid-August, Mr Butterfield's team had some 90 programmes either in progress or awaiting commencement. These include ongoing integration efforts, such as the integration of data centres, as well as enhancements to existing business models. "There are some businesses that we are choosing to redevelop and add new functionalities to, partly because the market has changed shape and partly because we wanted to make a new offering in the market," says Mr Butterfield Prime brokerage, for example, is a business that the firm hopes to create anew.

From mid-January, the bank entered phase two of the implementation, with the aim of scaling up the transaction capacity to 200,000 settled trades a day. The team is also engaged in innovation-led and client facing projects, which Mr Butterfield hopes will ultimately add to the bottom line. But there is also further nitty-gritty work to be done. Nomura has determined to move out of its acquired location in London's Canary Wharf, which will involve transporting two on-site data centers which will undoubtedly prove a "massive" task, says Mr Butterfield. It is clear that the team has been a victim of its own success. Expectations on the part of the business are now high. "As a technology team we've set a precedent about how fast we can get things done, which is hard to manage," says Mr Butterfield. Funding IT projects is not the key challenge but rather it is the ability of the organisation to simply digest the volume of work required that proves most challenging, says Mr Butterfield.

"Even if I had all the money in the world, there is a limit on the change you can get through in any organisation in a given timeframe. It is not about money: you've got to make sure that your priorities and choices are the right ones, and you have to put structure around those."

The European team is also deeply engaged in building out the supporting infrastructure for Nomura's expanding US franchise, which will depend to a great extent on the European operations. The bank is using the opportunity to standardise and refresh several platforms globally. In this regard, Mr Butterfield is in an especially unusual position. '"We must be one of the few firms out there seriously investing in its technology,· he says. "My aspiration is that we will come out the back of the crisis as a new big firm, but also with the latest and best technology platforms on the street."

Career history

Mark Butterfield

2005 - Appointed CIO for EMEA at Nomura.

1994 - Joined Nomura as head of strategy and architecture.

1990 - Joined Credit Suisse as senior developer/project manager at Credit Suisse First Boston.

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