Joining Forces—The Birth of Brown Brothers Harriman

At first glance, the Harrimans and the Browns seemed as different as night and day. The Harriman brothers were seen as aggressive, even a little pushy, and eager to make a name for themselves. The Browns seemed somewhat staid by comparison.

Yet the two family firms had much in common. Both believed in honest dealing and integrity in business. Both took no chances with their capital. And both firms were bound to each other by intimate friendships. Twelve of the 17 Partners in the Brown and Harriman firms had graduated from Yale, many of them in Roland Harriman’s class.

Having tread similar paths, they were open to joining forces when the opportunity presented itself.

According to firm lore, the idea of a merger was first floated among six partners from the two firms in November 1930 on the train from New York to New Haven for the annual Yale-Harvard football game. In fact, the idea had been circulating for a while, its benefits of a tie-up were obvious to all concerned.

Those benefits extended well beyond the needs of the moment.

For Brown Brothers, the union would give them access to the capital they needed to do a bigger business. For the Harriman firms—which had distinguished themselves more for imaginative deal making than for management—it would provide some badly needed discipline, along with the stamp of validity that came with the century-old Brown Brothers name.
The new firm instantly became one of the four largest private banks in the country. Even then, Brown Brothers Harriman was unusual, if not yet unique—a large commercial bank that was owned and operated by a partnership instead of a corporation, with partners bound to the firm and to one another by unlimited personal liability. As Roland Harriman later summed it up, “We are really all in it together.”

This precept would be tested sooner than anyone expected.

In 1931, a few months after the merger closed, Germany declared a Stillhalte, or standstill, on debt payments to foreign private creditors, including over $10 million in credits from BBH—roughly the size of its entire capital. The firm’s liabilities, however, were nearly 10 times that amount, leaving BBH Partners, bound by unlimited liability, facing personal and financial ruin if the firm could not meet its obligations. Only an emergency infusion of $10 million from the Harrimans, Averell and Roland, staved off collapse. This was not the end of the Harrimans’ investment in the future of BBH.

Knowing their rescue had saddled other owners with overwhelming debts to the firm, the Harrimans reallocated their own working interests in BBH to their fellow partners, enabling them to retire those debts over time and keep the firm viable. This reaffirmed the principle of partnership without which BBH would not have weathered the Depression and the Second World War.

 

200 Years of Partnership

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