One group of buyers that you need to be very aware of as you look for investors in your business are family offices.
Family offices have been around for decades and in some ways operate as private equity firms do. But there is one major difference: Investment hold times are much longer for family offices. In fact, unlike PE firms that typically retain an investment for 5-7 years, family offices, in many cases, plan to hold their investments forever.
Because their hold horizons are much longer, family offices have continued to be active acquirers despite the ongoing pandemic and related economic challenges. A recent article on middlemarketgrowth.org was quite informative about family office acquisition plans.
Entitled, “Faced with Uncertainty, Family Offices Take the Long View”, the publication was full of really good information about family office plans. But one point really stood out to me:
Many investors are continuing to deploy capital, despite uncertainty caused by COVID-19, according to a survey of institutional limited partners and family offices from Campbell Lutyens, an independent private equity advisory firm.
Despite some changes to the due diligence process, family offices are generally well-positioned to invest right now. They aren’t locked into a fixed timetable for making investments and selling their holdings, so the pause in new transactions at the beginning of the year didn’t necessarily hurt them. And if it takes longer to exit or do new deals, a family office can usually wait that out.
“It’s a delicate balance,” Dan Patterson, founder and chairman of Patterson Thoma, a family office based in Dallas, stated. “We wanted to get our bearings and we took time to do that at the beginning of this year. But you also want to stay in the mix so that you aren’t missing out on new opportunities.”
And that is another point that the article made: Despite what you may think, there is a tremendous amount of competition out there right now among family offices who don’t want to lose out on the limited number of good targets in the market now:
Andrew Glaze, founder and chief investment officer at Shiro Capital, says the deal environment remains competitive, despite uncertainty about the broader economy. His Los Angeles-based family office makes minority and control investments in middle-market businesses.
“We’re looking at the smaller end of the market, and it’s still really crowded,” he says. “We might look at a deal once and by the time we come back, it’s already under a letter of intent. Or we’ll look at a deal and there are already two or three other families interested in it.”
And we concur based on interest we have seen from buyers regarding our clients. In fact, during the 3rd quarter of this year we closed more transactions than any quarter in our history.
Since requests for our Non-Disclosure Agreements (NDAs) from buyers are up 45% so far this year, we expect the level of buyer activity to continue at a high level through the end of the year (generally the 4th quarter is the busiest quarter in deal making).
If you would like to learn more about how family offices are operating in our current market, I would invite you to read the full article:
But to learn even more, if you haven’t done so yet, you should attend a Generational Equity growth and exit planning conference. Not only do we discuss family offices; we also talk about the entire buyer universe and give you ideas on how to position your company to attract the most interest from buyers. To learn more about our conferences, please use the following links:
Carl Doerksen is the Director of Corporate Development at Generational Equity.
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