A family office is a vehicle set up to manage the complex fortunes of very wealthy families.
In Australia, think Gina Rinehart, Mike Cannon-Brookes, the Paspaley family and the Costa family.
While some family offices are well known and make the headlines with their acquisitions, others operate under the radar, pursuing their own objectives quietly, away from the spotlight. Over time, they build relationships with advisors who they know will present investment opportunities to them.
Family offices can be single family offices (SFO’s), serving just one family, or multi-family offices (MFO’s) where several families pool capital.
Why are we talking about Family Offices?
Family offices are significant acquirers of businesses. Every fund is different in terms of the type of businesses they target, industry sectors and deal sizes.
If you are thinking of selling your business, it’s worth knowing a bit more about family offices, the types of acquisitions they may be interested in and deal sizes they look at.
Why You May Consider Selling to a Family Office
While the objectives of each family office will differ. Here are some good reasons you may want to consider a family office investing in your business.
Patient Capital & Longer Investment Outlooks
Patient capital refers to taking a longer-term outlook on investment. Let’s take private equity firms as an example. They will typically hold a company for around 5-7 years before reselling. They need to resell to deliver a return for their investors. Family offices are not necessarily bound by those timelines. They can often hold companies for longer periods enabling the business to fully realise their envisaged strategies.
Many family offices will keep the existing CEO in place and typically won’t take control over management and operations. This is particularly relevant if they support the business strategy of the current executives and would like them to continue in the business.
For a seller, this can be attractive when you want to take some chips off the table but would like to see the business continue to grow under your stewardship. It’s also appealing for owners concerned about employee job security, business relationships, and legacy issues.
Family offices tend to have expertise in specific sectors, these sectors are often where they have built their businesses or created their wealth. It makes sense for them to continue investing in those industries. The advantage is that they can provide an invaluable source of advice as well as bona fide market expertise for the executives that stay on to run the company.
There are many benefits to sell your business to a family office. It’s an option that can provide more freedom for both the acquirer and target. If you are a Founder and CEO and you would like to stay in the business, driving it forward with additional backing, then an investment or acquisition by a family office could be the right move.
The extent to which family offices are making direct acquisitions has increased over the last decade. This is expected to grow as these wealthy families and investment vehicles seek new ways to engage with the capital market.
At Exit Advisory Group we help entrepreneurs maximise company value and exit at the top of their game.
We do this by giving business owners the tools and strategies to design more profitable, efficient and enjoyable businesses to own - that are also less dependent on them. When they choose to exit, they are in the best position to unlock the wealth in their business and be rewarded for their hard work.
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