On a recent trip to London, my loquacious taxi driver revealed that he and his wife had just celebrated their 50th wedding anniversary. I couldn't help but ask him the secret to his long marriage. He replied, "We've only had one argument. Mind you, that argument has lasted 50 years, but we've only had one argument."
What is the secret to success for advisory firms that decide to take the plunge? After all, a merger resembles a marriage of sorts, with many of the same challenges and few of the same benefits. Similar to partners in an ill-conceived marriage, many advisors expend more energy on the wedding than on the long-term relationship.
In contemplating the metaphor of a merger as a marriage, I searched the Internet for "keys to happy marriage." A website called AmazingFacts.org offers several tips that fit our discussion of advisors combining practices. For example:
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Continue your courtship. Successful marriages do not just happen, they must be nurtured.
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Guard your thoughts; don't let your senses trap you. Uncontrolled thoughts have the same consequence as a car parked on a hill in neutral. Something will probably happen—resulting in an out-of-control disaster.
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Never go to sleep angry. Holding onto resentments and grievances creates an unhappy and volatile work environment.
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Remember that criticism and nagging destroy love. Don't expect perfection, or bitterness will result.
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Be clean, modest, orderly and dutiful. Laziness, arrogance, disorder and slovenliness break down trust and respect between parties.
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Be reasonable in money matters. Showing confidence in your partner's managing ability usually makes him or her more businesslike.
In other words, the article suggests that maintaining a keen interest in your partner, practicing respect and trust, and resolving disputes calmly all build a stronger union. Sounds like common sense—but how do advisors of merging practices approach the same challenges?
In my observation, mergers require purposeful cultivation in order to thrive. The design, implementation and continued development of a shared strategy will yield a healthy and productive firm, but it generally takes about three years for a good merger to stabilize.
When two firms merge, cultures collide. Sometimes challenges arise over firm values, but often the individual entrepreneurs create friction by competing for relevance and power. Before emotion takes root—and before the agreement to merge is signed—both parties should agree on what kind of firm they want to create together. It's helpful to develop a statement of cultural values that addresses your relationship to each other, to employees, to clients, to your community and to your vendors. Include clear and reasonable expectations about what success will look like in this combination, and begin to spell out the roles and responsibilities of each partner.
Successful mergers depend on new partners getting along and communicating in a civil and businesslike way. Coming together requires sustained effort. Partners must resist forming polarized camps, as that dynamic will undermine the original vision of a bigger, better, stronger firm. Remember, the effort around integration requires as much perspiration as the negotiations.
In 2006, I wrote a book published by Bloomberg Press entitled "How to Value, Buy or Sell a Financial Advisory Practice" based on my work with hundreds of advisors who were engaged in a multitude of internal and external transactions. I recently revisited my findings to assess whether much has changed in light of the uptick in advisor-to-advisor sales we are starting to see. The distinctions between successful mergers and struggling combinations still hold true today.
