Mergers and Aspirations: Friedman, Brodeski Share M&A Success Stories

Dollars often drive the decision behind a merger or acquisition. It could be the promise of a larger share of wallet from existing clients, greater profitability from creating economies of scale or more fruitful succession planning. What often isn’t discussed, as merger veteran Greg Friedman of wealth management firm Private Ocean pointed out in a 2014 Wall Street Journal article, is the disruption.

The merger may cause some clients and good employees to leave. Unless your merger drastically altered the financial order of things, their departure is probably due to a single factor: a change in culture, whether actual or feared. Suppose, for example, that a firm of easygoing advisors known for first-name birthday notes and a fun annual picnic morphs into a somber group of suits who address clients as “Mr.” or “Ms.”

Your clients and staffers choose to work with you because they like your culture. How can you keep from losing it—and them—in a merger? For some ideas, I interviewed Private Ocean’s Friedman and Brent Brodeski of multi-acquirer Savant Capital Management.

PROTECT THE VALUES BEHIND YOUR CULTURE

“The definition of a culture,” Greg Friedman observed, “is what happens in a firm when nobody’s looking.” Friedman is president and CEO of Private Ocean, a $950 million independent RIA firm in San Rafael, California, formed by the 2009 merger of Friedman & Associates and Salient Wealth Management.

In planning a merger, Friedman believes the alignment of the two firms’ cultures is crucial. “I would argue that it is the key determinant to a merger’s success,” he said. As he wrote in a 2012 blog for ThinkAdvisor.com, number crunching is the easy part: “I’m talking about blending cultures, philosophies, goals and all that other intangible stuff that probably got you started in the first place.”

“Blending” is the key word. “In a merger, neither culture remains 100% intact,” Friedman told me. “What emerges will be a new culture, exhibiting most of the attributes of one of the cultures.”

Friedman & Associates, though only half the size of Salient in AUM and staff, had a culture whose core values Friedman wanted to preserve. “Our culture exhibited characteristics and values important to me—and by extension to the company,” he explained. “People acted with integrity, living up to their word, with passion toward taking great care of clients and each other, and with humor and collegiality.”

A discussion of the two firms’ different cultures was an important part of the courtship process. In contrast to one partner’s collaborative and outgoing environment, Friedman said, the culture at the other company was “very quiet, doors shut, you work hard, you go home.” To address these differences, he and his people met frequently with Salient CEO Richard Stone and his team. “We thoroughly discussed values, how events were handled—everything from client events to employee birthdays. The result is that a new culture was created, a blend of the two.”

Staffers were urged to keep their doors open to each other, and fun activities within the collegial atmosphere were encouraged. “We had turnover,” Friedman acknowledged. “But the new people who came in fit the new culture well.”

At the same time, there was a “tremendous amount” of planning about how to handle the merger with the two firms’ respective clients. “We developed a communications strategy that included timing, method—email, letter, in person—and a series of client events and meetings to address this,” Friedman said. “Of course, some clients were concerned and some eventually left, but for the most part we were successful.”

Can merger-caused turnover be eliminated? Friedman doesn’t think so. “When you merge two companies, culture clashes are inevitable,” he said. “There will be people who will not like things and will generally ‘self-select’ out.”