Insights & Info

Insights > The Growth of Middle Market Family Offices

The Growth of Middle Market Family Offices

By Generational Equity

Resized iStock

One of the most interesting trends we have seen develop over the past decade in the M&A arena is the tremendous expansion of Family Offices moving from investing via private equity firms to direct investing in middle market companies.

For those of you unfamiliar with Family Offices (and many are because of how secretive and private most Family Offices are – more on that later), here is the general definition of a Family Office: A Family Office is a privately held company that handles investment management and wealth management for a wealthy family, generally one with over $100 million in investable assets (although many are far smaller than that), with the goal being to effectively grow and transfer wealth across generations. The company's financial capital is the family's own wealth.

Our friends at Axial recently released a comprehensive study on the growth of Family Offices and what makes them unique (separating them from traditional Private Equity firms). Here is how they summarized today’s Family Office landscape:

Few if any segments across the M&A market are as enigmatic as the family office. Their growing presence, both in the breadth of new family offices and growing volume of capital at their disposal, is particularly intriguing to sellers and investment banks seeking to forge new relationships. The caveat is that most family offices also tend to maintain a very low profile, prioritizing privacy over unconstrained deal flow. This can make it challenging to not only identify prospective family office acquirers, but also to understand the types of assets that may appeal to a category of investor that has historically been difficult to categorize.

So, the first point above is critical. Family Offices should be on the buyer list you create for your business when ready to exit. However, the challenge for most non-dealmakers is that finding them, and more importantly, finding the ones actively investing in your industry, can be a HUGE challenge.  This is one of the reasons we highly recommend that you hire a professional M&A firm like Generational to represent you. We have a buyer database of over 34K, a good portion of which are Family Offices. They have told us exactly what they are after, enabling us to create highly targeted lists of buyers for our clients. But on your own, finding them can be a challenge.

And here is why Family Offices should be part of your mindset as you consider exiting:

The biggest factor influencing investment strategies, and distinguishing family offices from
other buyers is the extent to which investors aren’t constrained by timelines to source, close and exit investments or under any pressure to put capital to work in less-than-inviting conditions. Again, the overriding objective for most HNW (High Net Worth) and UHNW (Ultra High Net Worth) investors is capital preservation.

This is why our clients have found working with a Family Office so rewarding: Typically, the family behind the capital doing the investing has grown up in your industry AND they are all about maintaining and growing the legacy you have created.  For many of our clients, exiting can be very troubling emotionally, especially if the business is 2-3 generations in. 

The beauty of most Family Offices is that they understand the key motivation of growing and expanding your legacy and are willing to put the capital and expertise in place to do so, most often with no exit timeline at all.  As we have seen repeatedly, as the closing date gets closer to reality, the idea of legacy, community, employees, and other factors often become more important than the sale price for many business owners.

For many business owners, Family Offices are perfect buyers!

If you would like to learn more about all types of buyers (including Family Offices) I would recommend that you attend a Generational Growth and Exit Conference soon. We hold these throughout North America and they are designed to get you started on the right foot in your exit journey.

Bottom line: There are loads of buyers out there right now looking for well-run companies (and even some poorly run companies), so cast as wide a net as you can when you work on your exit plan and try to find some Family Offices active in your niche.

Carl Doerksen is the Director of Corporate Development at Generational Equity.

© 2022 Generational Equity, LLC All Rights Reserved

Make an informed decision

The best decisions in life are informed decisions. We release educational business insights like this every week. Subscribe to make sure you don’t miss the latest news, views and analysis.

Success

Success, you have been added to our list.

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
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.
Jay Dinnison, Owner of Sharpe Mixers
After attending a conference with GE, I decided that the value they bring would be worth the expense and as soon as I started working with them, I realized that was the right decision. When we started to get LOIs, Fred Zweifel took the lead on the communication and supported negotiations throughout the process, which got tricky as we moved forward. I learned that it can be common for companies to make a great offer then work to erode that price with their discoveries, but Fred and the GE team kept that from happening.
Caroline Connelly, CEO, OptoTest
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 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
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.
Bil MacLeslie, CEO, ipHouse
I decided to attend the conference and hopefully receive some guidance on how to structure an exit plan of my business. Upon arriving at the conference, I was so impressed with the presentation given by Generational Equity that I set a future appointment that week to discuss the possibility of selling my business with their Senior Managing Director David Robinson.
JoAnn Ellis, Owner of Fondren 5 Star Kennels
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
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.
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.
Robert Evans, President and CEO of Mealtracker Dietary Software
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.
The most important contribution I think Ahmad made was with his personality and work ethic. He is sincere, efficient, and very hard working. He was available to me at all times, whether it was for specific detail of the negotiation or just to talk through the bigger picture. He listened, advised, and recommended, but never forced his idea or opinions. In the time we worked together, he became a valued colleague and also a friend.
Salvo Stoch, Founder and CEO of Sleeping Partners
We were represented by Michael Goss with Generational. The due diligence was grueling and exhausting, but Michael propped us up and kept us motivated throughout the process. Debi and I continued to ask each other how we could possibly make it through this process without the assistance of Michael. Michael's professionalism and knowledge is absolutely amazing, and we are so blessed to have had him by our side as we made our future dreams come true.
Bob and Debi Lee, Owners of BL Technology, Inc and BL Tl Services, LLC
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
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.
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).
Bil MacLeslie, CEO, ipHouse
I wanted to take this opportunity to thank you for all that you have done for us. Not only did you take care of all the aspects of the sale but took extra care to make sure we knew what it looked like every step of the way. I will definitely recommend your company to anyone that is in a position to or looking to exit their business.
Shane and Johanna Kline, Owners of Vision Upfitters
The professionals at Generational Equity then helped develop a roadmap for enhancing the value of the firm and an evaluation report. This was completed by June 14, 2021. We then developed the Confidential Information Memorandum and put Taylor Studios, Inc. on the market by July.
Generational Equity’s professional staff helped me every step of the way. Their network and professionals are the only reason I sold my company this quickly. For me this is a once in a lifetime sale and I was unfamiliar with the process. I was able to lean on them with questions and concerns.
Betty L. Brennan, President, Taylor Studios
Through the sale process, Generational brought in several interested buyers and we closed in about 6 months. I am so glad I accepted that invitation to the conference and could not be happier with the whole process. The team at Generational coupled with their knowledge and guidance was so valuable that in the end, I know I could never have done this on my own!
JoAnn Ellis, Owner of Fondren 5 Star Kennels
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
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
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
We had the pleasure of working with Mr. Ahmad Behjati Managing Director, M&A, for Generational Equity during our acquisition of Papa's Dodge in late 2021. Generational Equity and Mr. Behjati represented and marketed Papa’s Dodge. As our primary contact, Mr. Behjati was professional in every facet of this acquisition process, conveying valuable advice most times and assisting us in every step of the process.
Rick Greene of Dobbs Equity Partners LLC
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 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.
Thanks to you, the entire GE team and especially Michael Goss for driving a great valuation, coaching me and driving the process across the finish line. Please let me know if there is anything I can do to support GE going forward. P.S. Given my experience with GE I felt comfortable enough to sign up with Generation Wealth Advisors!
Tom Currier, Former President & CEO, Rackmount Solutions
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