Moving the family forward
Dan Agnew had a vision for developing strong family bonds and ensuring that past mistakes would not be repeated. The family worked to realize that vision -- even after their operating company was sold.
Dan Agnew and his brother-in-law, Dick Lytle, were partners in Mt. Hood Beverage Co., a beer distributor in the Pacific Northwest. Through a series of acquisitions in the 1990s, the business prospered. Dick's two sons were already working in the business, and three of Dan's children would soon be graduating from college. Dan understood that for a family business to succeed over the generations, younger family members had to be prepared to work together as a family and a business. But he didn't have a plan for educating them.
In 2004, he hired a consultant to work with the extended family. Over the next eight years, they met twice annually to build a cohesive and supportive family—one in which family members were knowledgeable about financial matters and comfortable talking candidly with one another. Then, in 2012, the family received an unsolicited and irresistible offer to sell the business, which it accepted.
Dan wasn't ready to give up on his desire to have the family work together over the generations. He proposed that the family pool the proceeds from the sale and set up a family office to invest their money jointly. The family agreed, and The Agnew Company was born.
Steve Lytle, 47, a fourth-generation family member who serves on The Agnew Company's board, says the family segued smoothly from business owners to an investor group because their work with the consultant helped lay a solid foundation. "We were running on parallel tracks, concurrently taking care of the family business and the business of the family," Steve says. "The family systems and family processes we had been developing during that time made the smooth transition possible. We couldn't have done it without them."
Starting on the right path
The impetus for hiring a consultant came from an article Dan had read about family businesses. The article said that most family companies failed before the third generation, but those that had formal governance, family meetings and transparency had a better record of surviving. "That rang true to me," recalls Dan, 70, who is CEO of The Agnew Company. "I wanted to get our family started on that path."
Dan knew from personal experience what can happen when younger family members are excluded. His grandfather, Sam Agnew, founded the Agnew Lumber Company, a manufacturer of lumber products near Centralia, Wash. Over two decades, Sam acquired large tracts of timber in Oregon, California and Canada as well as a plywood factory. He also owned and operated a commercial cattle ranch operation in Washington, managed by his son and only child, Jay.
After Sam died, Jay ran the business. When Jay died in 1980 at age 59, Dan and his sister, Zan, were in for a shock. They knew little about their father's businesses and never imagined he would leave his estate in such a mess. It took the family the better part of a decade to sort it out with the IRS.
"My grandfather hid everything about his businesses from his son, and my father did the same with us," says Dan. "Only when he was very ill did he start talking, but by then there was little time left, and his directions for passing on authority to me and my brother-in-law were muddled."
Dan was determined to avoid mistakes like this. In 2003, he was introduced to Lee Hausner, a clinical psychologist and business consultant. Hausner is senior vice president of Family Enterprise, a division of First Foundation Inc., in Los Angeles. After a lengthy conversation with Hausner, Dan was optimistic that his family could accomplish what he wanted it to do. In 2004, Hausner organized the first meeting of the Agnew family. She and the extended Agnew family have continued meeting twice a year ever since.
"What's important about the Agnew family's story," says Hausner, "is that they recognized from the start that this was an ongoing process. Businesses and families change over time. Healthy families know that to be viable, they have to keep thinking and talking about what they want to be, and that takes a lot of work."
Getting the family on board
The fourth generation consists of Dan's four children and Dick and Zan's two sons. When Dan presented the idea of working with a consultant, his three youngest children were still in college and skeptical that this was another of "Dad's crazy ideas."
"Dad said that he wanted the family to be transparent about money, but we really didn't grasp what it was all about," says Sam Agnew, 35, a fourth-generation family member who serves on the board and on the family council.
When the fourth generation was growing up, their families lived simply. Dan was a ranch manager and Dick Lytle ran a mill operation in a small town in Oregon. In 1977, Dick bought a small wine and beer distributorship in Oregon that represented Lucky and Gallo brands. Riding the early wave of consolidations in the industry, he continued acquiring mini-distributorships, merging them under the name Gold River Distributing. Then, in 1990, Dick, Dan and Zan bought a larger distributorship that represented Coors, Pabst Brewing and other breweries in Portland; they named the distributorship Mt. Hood Beverage. The family also had investments in timber, real estate and private equity, in addition to a commercial cattle ranch. When Dan and Zan's grandfather Sam Agnew died in 1963, he left his heirs timber holdings of more than 70,000 acres and land with an undeveloped coal resource.
At the first family meeting, Dan reiterated that he didn't want to keep any secrets about the businesses from the family. In the first demonstration of full disclosure, Hausner wrote down the amount of the family's wealth for everyone to see. "The kids just about dropped off their chairs," she says. "They knew the family had money, but not great wealth."
Hausner is a proponent of treating wealthy families as businesses. "Most have shared assets," she says, "so family members should be held accountable as they would be in [a] business." Hausner steered the Agnew family through the process of writing a mission statement and developing a constitution, considered a living document subject to amendments.
Her work with the family centers on an educational approach she calls FISH: developing the financial, intellectual, social and human capital of every family member. Dan, who has become an advocate for FISH, says, "I'm a firm believer that families that don't invest in all of the components of FISH won't be able to sustain financial capital over the generations."
Hausner also guided the Agnews in establishing a family assembly, a gathering of the entire family. The family assembly began meeting twice a year in 2004. Each family meeting includes education on one component of FISH, often presented by an outside expert. Aspects of financial education covered at the meetings have included reading financial reports, money management, estate planning and talking about money. Education on improving communication is ongoing.
Sam remembers the first family meetings as intense and emotional. "Lots of tears were shed as family members starting opening up about conflicts with parents, problems with kids, miscarriages and divorces," he recalls. "Since then, we've had a lot of education on communication, managing conflict and parenting. Now we're comfortable talking about any personal stuff, and we go all in. Everyone walks away from these meetings feeling good about the family and with something that they can take back to their work or family that will help them. We've created a really cool family culture."
One of the first obstacles the family encountered was the younger generation's resistance to the requirement that any family member who becomes engaged must have a prenuptial agreement. "At first the young people were offended and protested against what they argued was a lack of trust," says Zan. "It took years before everyone got comfortable with it and understood why it was necessary."
In 2007, the family established the Agnew Family Foundation with a gift from Zan and Dan. Zan, 68, is the foundation's president. Currently, there are ten women family members on the board. Why only women? "Because the women in the family came up with the idea," says Zan. "We've invited men in the family, but they're too busy with work." The foundation supports programs for children in the communities where family members live. For now, it accepts only eight proposals a year so that it can do proper due diligence. It also has a junior board of eight fifth-generation members who serve as observers.
Forming the family office
In 2008, Dan and Dick merged their two distributorships, Gold River and Mt. Hood, with another family-owned beverage company to form Columbia Distributing. It became the largest beverage distributor on the West Coast. Dick and Zan's sons, Steve and Andy Lytle, worked in the business; Steve succeeded his father as Mt. Hood's president and CEO. Dan's son Sam Agnew joined in 2005.
In 2012, the Agnew family received the offer to buy Columbia Distributing. The terms of the deal were not disclosed, but some in the industry estimated the sale price to be in excess of $500 million. The family was at turning point. Third- and fourth-generation family members could either go their own way or pool their assets to invest together in a large family office. Dan made the case for investing together. Besides more opportunities for large-scale purchases and breaks on fees, he argued, they would have fun learning and investing as a family.
The years of working together to educate the family about finances and build an open and trusting environment paid off. The family unanimously recognized the benefits of investing together and of continuing to meet as a family. Every adult household voted to pool their money; 90% of the after-tax proceeds of the sale was returned to the family office to be invested together.
The Agnew Company, the family office, manages the family's collective assets held in two holding companies. Only blood descendants can be shareholders. Dan and Zan opted out because they want the family office to benefit future generations so, for now, the shareholders are the six members of the fourth generation. Dan and his son-in-law, Darrin Kasteler, are the only family employees.
With the establishment of the family office, the family formalized its board, bringing on two independent directors. Its goal is to eventually have 50% independent directors. Simultaneously, the family set up a family council, which works with the board. While only blood descendants serve on the board, the extended family is invited to attend family assembly meetings.
The family has had five divorces among the third and fourth generations. It credits the work it's done on interpersonal relations to help family members heal and move on. After Zan and Dick divorced, they recognized the benefits of remaining business partners. Zan is now remarried to Jack Peat. He and his children attend family assembly meetings, and Dan, Dick and Jack frequently play golf together. "The difference between where the family was when we began and where we are now is like night and day," says Zan.
A few years ago, Dan and Zan bought a vacation house in Eastern Oregon, which they gave to the fourth generation to encourage them to work together collaboratively. According to the agreement, the six would have to decide how to decorate and maintain the house and determine who got to use it when and how often. "They embraced the idea," says Dan, "and figured out in a supportive and trusting way a system for use that included spouses and stepkids."
Planning for the future
The family experiment Dan launched in 2003 has brought the family closer, multiplied opportunities for investing and learning, and increased their enjoyment in being together—by all measures a great success. "It hasn't been all sunshine and lollipops," says Steve, "but the moments of tension and stress have all been manageable." In fact, Steve was so impressed by his family's experience that, after the sale of the business, he became a professional adviser to multigenerational family businesses.
Hausner, who wrote a book about children of affluence, is alert to the negative effects great wealth can have on children. The Agnew family, she says, doesn't have any slackers. "No one is sitting around on trust funds," Hausner observes. "Everyone is working and productive. Everyone is committed to having a healthy family that does good with its wealth for the family and for others."
Dan is the acknowledged patriarch of the family whose vision of a successful multigenerational family brought the family to where it is today. After leading the family and business for more than 30 years, he will likely retire as CEO of The Agnew Company in the coming years, an event the family is planning for. "We're knee-deep in discussions now," says Steve. "All the work we've done over the years is building toward a smooth succession. Governance is a decision-making process, and the end game is a successful transition of leadership and wealth."
Deanne Stone is a business writer based in Berkeley, Calif.
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