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Ed Lazar & Charlie Grace Jr: When one plus one equals more than two

What could possibly convince two well-established, independent and family-owned enterprises to take on the ordeal of combining two family offices into one?

Make no mistake, growing any family office by combining businesses rather than relying on organic client growth is not to be taken lightly even in a favourable market environment. Add to the mix a 2008-09 economic landscape that at times looked like a financial services wrecking yard, and the deal-making process really gets interesting.

Even the most compatible and motivated parties will inevitably find that the merger or acquisition process, when done correctly, is more time-intensive and all-consuming than they may have imagined. Yes, this is growth for grown-ups.

Our story – the mutual commitment to combine Threshold Group and Ashbridge Investment Management into a single, independent family office – is a classic tale of the real work required to create an equation of synergy. As we have learned firsthand, the theory of one plus one adding to more than two can be proven true.

But the building of a win-win formula requires patient leadership, visionary ownership, resilient employees, steadfast persistence, a disciplined pace, and a healthy absence of hubris on all fronts. If we're honest with ourselves, few of us in the realm of family office, or any other growth business, can claim to practice all of these virtues all of the time.

For Threshold and Ashbridge, we started with a clear business rationale that focused on our respective clients. The idea of blending two like-minded and culturally compatible firms made immediate sense from the standpoint of building a sustainable business in an increasingly competitive marketplace.

Operationally, the idea of marrying a strong US West Coast presence with a strong US East Coast presence was a no-brainer. Together we could enhance our infrastructure, broaden our skill sets, ensure regulatory compliance and broaden our geographic reach in working with client households. When serving clients, fewer trips through airport security is always a win.

However, the true test to our business rationale came when we looked at whether this combination would represent genuine value for family clients.

Would service be enhanced? Would investment and service expertise be broadened? Would the disruption of change undermine our best intentions to continue exemplary client service? Would our employees embrace each other's strengths or waste time in talent contests or exhibitions of bravado?

Since the business models at both firms were built on intimacy that originated with stand-alone, family-owned offices, we understood that the response from our clients would trump everything else. So we started and ended each step of our process by asking a simple question: "What would benefit our clients in the long run?"

It sounds trite, but when you're knee-deep in lawyerly language or compatibility tests for data aggregation reporting systems, it's easy to lose sight of the human backbone in any deal. How many business combinations have ended because the emotional quotient of the agreement could not stand the test?

Fortunately, our owners – the families for whom our offices were originally created – played a vital and healthy role in our deliberative process. We engaged them on the front lines, and they asked the difficult questions on both sides. They reminded us to constantly view our work through the lens of family clients – because they think like clients. For our owners, our agreement was equal parts business deal and legacy. Would the future firm be something they all could be proud to have built for future generations? Suddenly the financial and operational details were just that, details.

Recently, the family office community has been abuzz with the question of whether single family offices should be looking to merge, sell or join forces with deeper-resourced multifamily offices (Click here for more on this topic). The consolidation trend is in full-swing in some corners of the marketplace.

As this occurs, our advice from the trenches is to remain selective and go slow. In our experience, this race is better run as a marathon than a sprint. Our coaching for any player on either the buying or selling side of the family office market can be boiled down to a few recommendations:

  • If you are selective about organic growth, redouble that selectivity when entering the process of acquisitive growth.
  • Ensure that full transparency becomes a habit and starts early.
  • Ask about client value at every turn.
  • Get help from outside experts, objectivity is worth the price.
  • Dream of what's possible, but have contingency plans for what's probable.
  • Pause once in a while to rest and reflect, this alone allows new solutions to surface.
  • Over-communicate.

We are excited to be embarking on what's next for Threshold and Ashbridge. Our enterprise will be a single, family-owned firm known as Threshold Group, and our intent is to continue a legacy of meeting and exceeding client expectations in a way that will set a standard for successful business combinations.

We will continue to behave as a boutique, but with the operational backbone and knowledge resources of a larger enterprise, including our affiliation with Russell Investments.

We have come out of the blocks with an enthusiastic response from clients, owners and employees. Alas, we also understand that we are probably somewhere near the 10-mile mark of our own marathon. Only 16 miles, 385 yards to go!

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