Family Offices: Potential Buyers for Your Business?

Family Offices: Potential Buyers for Your Business?

2021-02-24T05:43:40+00:00 February 25th, 2021|Deal Flow, Deal Flow Articles|

By Paul Skeen & Amber Ferrie

There are a number of different buyer groups to consider when selling your business. Typically, they fall into one of two categories:

Strategic buyers.
These buyers typically buy 100% of your business and assume responsibility for it.

Financial buyers.
These types of buyers invest in your business, helping it grow and increase in marketability before future sale. Typically, these include private equity groups, venture capital groups and hedge funds.

What is a family office?
A family office is a private investment firm established for the purpose of managing a family’s wealth. This type of firm establishes a new approach for wealthy families to directly invest their wealth in private companies or other investment vehicles.

Such organizations supposedly date back nearly a century to the times of John D. Rockefeller, but more recently have become a popular structure versus traditional investment firms. They can come in the form of single-family or multi-family offices, and typically hire tenured investment professionals to manage the office and invest their capital.

What are some advantages to selling to a family office?
Less control and influence
Most family offices are considered passive investors, which means that they typically do not take control over management and operations. When they complete a particular acquisition or investment, it is usually because they support the business strategy established by current executives and expect them to remain with the company after the transaction. PEGs may prefer to become more involved, depending on their strategy and relationships, and are more likely to call on operating partners or former industry executives to assist with operations.

Strategic buyers will typically integrate the acquired company into their operations, thereby controlling almost all decision making.

Direct and Efficient
By controlling their own wealth, family offices are free to make quick decisions and are less restricted in their selection criteria for investments. They are not subject to corporate board room approvals or restricted by PEG fund directives or limitations. This allows for additional flexibility to invest in emerging industries, alternative or niche strategies, etc.

Flexible Timelines
Family offices are able to alter their investment horizons depending on the deal and situation. They can hold companies for long periods of time, which may allow acquired companies to fully realize their intended strategies. This affords both the family office and company the ability to focus on long-term strategies, rather than short-term gains.

About Paul Skeen
Paul Skeen is an assurance partner with Eide Bailly and current President of MountainWest Capital Network. Paul’s experience in public accounting includes involvement in all aspects of financial and compliance audits and advisory services, with emphasis in services to dealerships, resorts and governmental entities

About Amber Ferrie
Since 2004, Amber Ferrie has performed business valuations and other consulting services for Eide Bailly clients. She specializes in business transaction advisory services, providing sell-side advisory services to lower and middle market clients who are looking to sell their business, as well as buy-side advisory services for parties interested in purchasing an existing business.