Business owners looking to sell their business, or attract an investment partner, may want to add family offices to their outreach strategy. These private family firms, established by high net worth families to manage their wealth, can offer unique advantages.
While family offices aren’t new, they have become more active in M&A in the last decade. In the past, family offices may have looked to private equity firms as a resource to grow their wealth, but new trends have many family offices investing directly in private businesses.
For a family office, direct investment can offer several benefits such as higher returns, greater control, and the ability to invest in industries that best fit their family expertise. By the same token, family offices can prove attractive to certain business owners and sellers. Here’s why:
Patient capital: Private equity firms typically have five to seven years before they need to resell their investments and deliver a return to investors. But family offices aren’t limited to specific timelines and can hold their investments longer.
That buy and hold strategy can be a good fit for business owners looking to take some chips off the table without exiting entirely. A longer investment period gives them more time to grow the business with support from their new, prestigious partners. Sellers concerned about employee job security, community presence, and legacy issues may also prefer a longer timeframe.
Industry specialists: These families made their fortune in business, and they tend to invest in the industries they know best. For business owners looking to retain a portion of their business, these buyers can provide untold value in terms of connections, influence, and expertise.
Less controlling: Some family offices have a reputation for being somewhat hands off. They’ll provide resources to help your business grow, while generally taking a more flexible approach to oversight.
Often, family offices aren’t interested in replacing management. This can be good for owners who will retain equity and continue to lead. But it means that sellers looking for a fast exit may not be the right fit (unless you’re leaving a proven leadership team behind).
The takeaway is that family offices can offer a better fit for business owners looking at a variety of exit options. If you’re selling, talk to your advisor about adding these groups to your target buyer list.
Be aware that these groups can be hard to reach on your own. Many family offices operate under the radar. They don’t actively promote themselves or announce they’re searching for acquisitions. What they do is build relationships with advisors known to present quality investment opportunities.
To access these groups, work with an M&A firm with widespread industry connections, a large buyer database, and access to exclusive M&A research tools. Talk to your advisor about what these family offices are looking for and how to best approach them.
By Scott Bushkie
With more than 20 years in the M&A industry, Scott is a recognized leader in the field, providing exit strategies and M&A advisory services to business owners in the lower middle market. He has successfully executed sales to domestic and international buyers, private equity firms, family offices, and strategic buyers. Follow DealCoach on Linkedin