If you’re in a situation where you’re seeking growth capital and/or potential recapitalization sources, you might have considered approaching a private equity (PE) firm. That can be a great strategy for business owners who have the ability and willingness to sell a large portion (or all) of their company within a strict time frame, but it isn’t the only option to consider.
Selling to a Family Office
Another relatively new option you might not be aware of is selling directly to a family office. Historically, family offices that were interested in investing participated as limited partners in PE funds. However, more recently, many have increased capital flow thanks to the bull market and are looking to diversify — and part of their strategy is to invest directly in other small- to mid-market businesses.
Sellers potentially can realize several advantages by working with a family office. They are often willing to take a minority ownership stake, allowing you access to capital while maintaining your leadership position. In addition, family offices are frequently able to be patient with their capital, partnering with sellers more as a long-term investor than a PE firm would be able to.
There are Challenges
While this can be a great opportunity for sellers, the process isn’t without risks and challenges. Because many family offices don’t employ investment professionals, they frequently don’t have the level of experience and the ability to keep a deal progressing that PE firms do. The talk at many M&A conferences is that family offices “want to do deals” but very few are actually “doing deals.” That being said, it is critical that sellers considering “patient capital” from a family office pursue approaching multiple family offices. Also, given the lack of infrastructure many family offices have to source and execute on transactions it’s important to have a team (attorney, accountant, and M&A intermediary) that can help to drive the process. Knowing the potential hurdles in advance and preparing for them can open doors to family office investment – a capital solution that many owners have never considered but should.
The intermediaries at Symmetrical Investments have combined decades of experience helping business owners sell their businesses to a variety of buyers, including family offices, ensuring that their liquidity needs are met and the deal runs smoothly. Feel free to reach out if you’d like to confidentially discuss your options for an investment from a family office.