The term “family office” has been in existence for decades. In fact, some family offices can trace their lineage back several hundred years. But the number of family offices has grown exponentially the last few years according to a recent article in Axial:
The number of family offices in the middle market continues to surge. There are at least 10,000 single family offices around the world, half of which were established in the last 15 years, according to a 2017 report by Ernst & Young.
Why have they grown so dramatically in recent years? Again, according to Axial the reason is very simple:
“Family offices historically weren’t usually involved in direct investments. But increasingly they have begun to look for ways to avoid paying the standard 2 percent management fee and 20 percent performance charge.”
On top of this, family offices traditionally were started by entrepreneurs in specific industries. Subsequent generations gained expertise in that industry and grew the business dramatically in many cases. Now they are recognizing that by making a direct investment in a company in the industry from which they came, this allows them to bring knowledge and expertise to the holding, most of which the original owner(s) would not have access to.
Another benefit we have seen to business owners that have family offices invest in them is the much longer hold time than traditional PE firms. In many cases family offices will hold their businesses indefinitely, which richly aids in building upon the legacy that the original founder created.
This is how Axial describes it:
Many business owners are drawn to family offices over private equity firms, for a number of reasons including the longer hold periods that family offices can typically support. Emphasizing this and other value-adds, like your family’s experience building and growing successful companies in your industry, can help tip the balance when businesses are considering multiple bidders.
For these reasons, more and more of our deal teams are establishing relationships with family offices in key industries to enrich the buyer lists they create for our clients. If you are entering the market without professional M&A guidance, you should seriously consider adding family offices to your list of targets.
Yet Axial points out a major challenge when considering family offices for your business:
Many family offices have traditionally made a conscious effort to fly under the radar when it comes to marketing and business development — they may not have a website or do any other traditional marketing.
I know that years ago when I began researching family offices that finding them at all was a big challenge and, even more so, to determine their investment mandates, size of acquisitions, and other key data. Although this has changed in recent years, and directories of family office groups are available, having a dealmaker at your side that knows how to find the appropriate ones, and speak their language, is vital.
One of the reasons for our success over the years is that our dealmakers are skilled in communicating with all types of buyers, including family offices. If you are interested in learning more about family offices and their viability for your business, you should set aside a few hours and meet with us at one of our exit planning conferences.
Although not every privately held company is a reasonable target for family offices, exploring your many options is vital.
To learn more about us and our services, please use the following links:
Carl Doerksen is the Director of Corporate Development at Generational Equity.
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We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.Bryan D. Horn, Owner, Over Under Clothing
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
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I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!Eric Erlandson, Owner, Action Fastenings, Inc.
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.Michael J Polarek, President, Paragon Packaging
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
Dear Chris and Andre, I just wanted to say thanks for all your help. Even though this process was not an easy one, it was comforting to know that I had a capable team standing beside me. You made me feel like we were almost your only client or at least the most important one. Thanks again, and I will recommend your service in the future.Shenille Engelhart, Owner – CLS Technology
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I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
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