WATCH: The best time for succession planning

Chris Merrill, who just sold a 75% stake in Harrison Street, said many firms only consider leadership transitions when business is bad.

M&A can help investment managers create staff stability and employee alignment, Chris Merrill, chief executive at Harrison Street Real Estate Capital, told PERE in a recent interview.

In the sale of a 75 percent stake in his Chicago-based firm to Colliers International Group, a deal that closed last week, Merrill expanded equity participation for some employees. When it comes to succession planning, however, timing is everything, he said.


We were really happy with our strategy. When we look at our performance, we’ve been very pleased. The one thing we were looking at as a firm is, how can we create more stability with our business? How can we look to incentivize the next generation of leaders within the firm? For us, we wanted to align ourselves in a stronger way with our LPs. It’s a tough thing. Finding the right way to think about succession and undertake succession is very difficult. We’ve seen a lot of firms that did it well and other firms that haven’t done it well.

When they think about succession, these businesses, these financial services firms, it’s really about the people. One needs to think about their people and undertake the succession discussions at a time when you don’t need to do it. A lot of times you see these succession situations taking place when something went wrong – the firm isn’t raising money, the firm’s losing people, something may have happened to a founder. We wanted to undertake it at a time when we really didn’t need to do anything.

What I would say is, do it at a time when you are in a position of strength and then think through your stakeholders. How will this affect the employees? Is there an overlap of staffing? Are you still going to have autonomy? How does this create more alignment with the LPs? Are we going to be able to share more carry with the team? Is more of the team going to be able to invest in products going forward? Think those things through, because ultimately what you’re doing is, how do you affect the best outcome for your employees and how do you create the best value for your limited partners? That goes hand in hand.