[The BGI Integration] Welcome to BlackRock: “Louder, Faster, Angrier”

Culture change resulting from mergers and acquisitions can be interesting though usually more interesting on the acquiring than acquired side of the bargain. In one or both cases it involves change. Any change, while fun to some, is dreadful for others.

And when it involves culture change, it hits people right in the values and behaviors bullseye: I love you, I’ve bought you, and now you need to change.

This change dance and dynamic was brought to mind by a former colleague at San Francisco-based Barclays Global Investors ( BGI), a firm that parent Barclays PLC recently sold to New York-headquartered BlackRock, Inc. to raise needed cash during the financial meltdown of this past year. By selling BGI [Disclosure: I worked with BGI from 2003-2006]:

Barclays will improve its financial strength at a time when it has begun to lag behind rivals that accepted help from the British government. Because Barclays shunned government aid, it has been forced to rely on private investors to bolster its balance sheet” according to the New York Times.

For a culture change perspective, it’s helpful to know that BGI was the result of Barclay’s purchase of a business called Wells Fargo Nikko Investment Advisors (WFNIA) in 1995, a joint venture that Wells had started with Nikko Securities in 1989. In the land of small worlds, Wells had had earlier bought the balance of Barclay’s failed attempt to establish a successful retail banking presence in the United States in 1985.

Barclays, with the purchase of WFNIA, proceeded to combine the quantitative group business it held in London, BZW Asset Management (BZWAM), with the new Wells Fargo Nikko business based in San Francisco.

As a practitioner, the  sense of the Barclays acquisition of WFNIA was more akin to gluing two parts of an operation together than a full systems and culture integration. While some – but not all – systems were unified, the feel of the organization was one of multiple organizations operating underneath a broad umbrella of corporate mission statements.

Once the dust of the Barclays acquisition of WFNIA fully settled, and a leveraged buyout by the now-BGI managers was aborted, the merger resulted in an organization with two global co-CEOs, Andrew Skirton, who based in London, and Blake Grossman who based in San Francisco. The legacy index business for the firm was headed up by Skirton, and the emerging active equities, Exchange Traded Funds, and Fixed Income businesses were headed up Grossman.

Many of the elements you might expect to see in more durable corporate integration such as culture and values clarification, common ways of handling day-to-day operations, etc. were mixed and sometimes far between. While the mantra was “one firm” a cynic could suggest that it was “many firms.”

BlackRock, on the other hand, has done a series of acquisitions over the last two decades, including R3 Capital Management, a part of State Street’s organization, the Quellos Group, and in its biggest deal, Merrill Lynch’s investment management business in 2006. The firm from the outside – through the glass door as it were – has a reputation for doing integrations well, retaining key employees, and integrating the acquired businesses and people into the BlackRock culture.

Fortune noted the following regarding BlackRock’s integration of Merrill:

In the Merrill deal, BlackRock followed its classic template: It acquired a business with complementary financial products, stamped its brand on them, and then inducted the conquered people into its culture. One way that Fink does this is by avoiding the toxic power-sharing arrangements that are common in Wall Street mergers, where the head of the division from the acquired company is given a seat alongside the person who runs the same division at the acquiring company. No co-heads, no infighting.”

BGI had a cultural reputation of being “bright”, “nice” and “collegial” – with more than a dash of passive aggressive behaviors thrown in. Execution in some areas was often faulted, and the collegial culture meant that conflict at times was avoided. From my own experience it could take months to make fairly simply decisions – decision making was often passed up stairs to the most senior staff where it queued up for a determination along with real significant issues. The passive-agressive side can be seen in the manner which key employees such as co-CEO Skirton would get whacked: here today, gone tomorrow.

BlackRock, on the other hand, has a reputation of being both far-sighted and being a good operations shop. Chief Operating Officer Sue Wagner and President Rob Kapito are viewed externally as excellent at what they do, and are thought to excel in supporting the vision of CEO Larry Fink. Things at BlackRock apparently get done, and it’s believed that people are responsible for doing what they say they’re going to do.

So what’s the reaction (at least from one BGIer) as the BlackRock integration of Barclays Global Investors rolls toward a Q4 close? Here’s their comment:

“On a side note, BGIers have all just done their year end reviews, and to the extent that people are willing to share their feedback, it can generally and most briefly be quoted as ‘you need to be louder, faster and angrier.’ Must be the BlackRock influence.”

From afar it sounds like the BlackRock integration is taking hold, and that BGI culture that was glued together will get more properly integrated into the new parent firm.