Leon LaBrecque's deliberate venture into succession
planning landed him and his 1,400 clients in a good place
Feb 15, 2019
@ 4:42 pm
It took a while before it became a
top priority, but Leon LaBrecque can finally rest easy knowing that at 63, his
business succession plan is in place.
After about eight years of weighing
his options, and 18 months of grinding out the details, last year Mr. LaBrecque
sold his $776 million Troy, Mich.-based firm, LJPR Financial Advisors, to
Akron, Ohio-based Sequoia Financial Group.
For Mr. LaBrecque, who is now the
chief growth officer at Sequoia and plans to work for between three and seven
more years, the decision to combine his practice with a firm with nearly $5
billion under management was easy, once he found the right match.
But until he was introduced to
Sequoia founder Tom Haught through his Charles Schwab custodian, Mr. LaBrecque
was doing what a lot of advisers do when it comes to succession planning.
"I initially thought I would
sell the business internally, but there would have been cash flow issues doing
it that way," he said.
"Doing it that way, there was
no risk mitigation and no liquidity," he said. "I would have gotten
more money for eight years, while gradually working less, but after eight years
there would be nothing."
Like any responsible owner, Mr.
LaBrecque wasn't just worried about himself. He was also considering what would
be best for his 24 employees, including three minor partners, and more than
1,400 clients.
"We looked at two different
aggregators," he said. "We even looked at mergers with smaller firms
and younger people, but we didn't have the firepower to make it happen."
In his 30 years of running his own
firm, Mr. LaBrecque had brought on a couple of advisers with their own books of
business, but he had never been involved in a merger or acquisition.
Sequoia, meanwhile, was looking to
expand its Midwest footprint at the same time Mr. LaBrecque was looking to step
away from some of the day-to-day duties of running a large advisory firm.
Even though Mr. LaBrecque said he
was immediately impressed by the way the Sequoia culture matched that of his
own firm, he wasn't ready to just sell his business and walk away.
"Leon saw an opportunity to
make a more durable organization, together, but he was reluctant to just merge
into Sequoia," said Mr. Haught, 54, who founded Sequoia in 1991.
Sequoia, which already had offices
in Ohio, Michigan and Florida prior to the acquisition of LJPR, had acquired four advisory firms
and sold a business unit since 2009.
Details of the transaction between
the two private firms were not disclosed, but Mr. LaBrecque confirmed that the
value of his firm in the cash and stock deal was based on a multiplier of
transferrable earnings.
Mr. LaBrecque said that agreeing on
the final price was a matter of "Tom and I haggling for about two hours in
one intense meeting."
Considering they were combining 24
employees from LJPR with more than 60 at Sequoia, both parties thought it was
important to keep everyone in the loop as much as possible. And to help ensure
a smooth transition to the new company, LJPR employees "got generous pay
packages, better fringe benefits, increases in base versus variable
compensation," Mr. LaBrecque said.
Once the financials were agreed
upon, the next step was to present the news to clients by announcing a
"soft close" about three months before the deal became final.
"We gave the clients almost 100
days to figure out what it would look like," Mr. LaBrecque said. "We
didn't want to surprise anyone."
By the time the sale closed in
December, LJPR had lost just three clients and one employee.
"It's very important to do
things to keep people on board, because you don't want to disrupt the
relationships with clients and you want to keep the team very much
intact," Mr. LaBreque said. "We made sure it was very transparent to
everybody on the team where we were going. And Tom came out and said we're
going to try to sweeten the pot a little bit, because you don't have earnings
if you don't have good employees."
From Mr. Haught's perspective, the
communication could have been better with Sequoia's employees.
While he said he wouldn't change
anything about the way he kept the LJPR team informed, he said he might have
overlooked the need for the folks at Sequoia to also know what was happening
along the way.
"The next one we do, I will
communicate more to both the current and new teams, so they can be as
comfortable as Leon and I were along the way," Mr. Haught said.
To handle the technology and systems
integration between the August soft close and the official closing of the deal
in December, three-person teams from Sequoia and LJPR worked together and met
in person weekly to combine the systems and troubleshoot scenarios.
The one thing Mr. LaBrecque said he
would have done differently is running more thorough pre-close tests on the
systems before switching everyone over the Sequoia.
"We didn't test-drive the
switch, and we found out some clients logged in and couldn't get into their
portal for a couple of days," he said. "If I was doing it over, I
would have been a little more diligent on the integration system, and I would
have tested to know exactly what was going to happen on the close date."
Mr. Haught said that in order to
learn something from the process and make the next deal even smoother, the firm
is conducting a "military review" with teams from both LJPR and
Sequoia looking at what went right and what went wrong.
"Culture is the most important
thing, and I think we could have gone faster in closing this deal," he
said. "When you find the right fit, you can accelerate the process."
Two months after the official close,
with the firms now fully integrated, Mr. Haught and Mr. LaBrecque acknowledge
there are a few points on which they agreed to disagree.
"I'm never going to root for
the [Ohio State] Buckeyes," Mr. LaBrecque said.
"I'll never root for the
[University of Michigan] Wolverines," Mr. Haught said. "But we don't
have a hockey team in Ohio, so I can root for the Detroit Redwings."
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