Family Offices, Independent Sponsors & Patience

As most professionals in and around the private equity industry are aware, wealthy families – or “high net worth” families who perform sophisticated management of their assets via a “family office” staffed to manage their often generational wealth – are increasingly showing interest in investing directly into private equity change of control transactions.  However, their methods for doing so vary, and generally, they tend to have a few trusted relationships with whom they seek to partner.  Oftentimes, these relationships will consist of a few independent sponsors such as firms like ours.  John Rogers, a very experienced PE attorney who also represents many families in these types of transactions, recently wrote a short article summarizing his current view on the trend.

We at KCG also call on and have existing relationships with a number of family offices.  Why?  Because they support us in our model of patience.  Patience to buy and build.  Patience to weather economic storms.  Patience in understanding that if your goal is to grow and evolve an enterprise, oftentimes that’s hard to do within the boundaries of a traditional PE fund duration.  We believe this family office trend will continue and become yet another standard facet of the PE industry, and further see it as a good thing for sellers of businesses.  This alternative – professional buyers who have patience – provides sellers with additional options outside sale to a strategic or a financial (i.e. traditional PE fund).  The more options sellers have, the better for them and their organizations.  But more importantly, just understanding this option exists – to sell your business to someone who isn’t in a hurry sell it again – we believe creates a wonderful opportunity all sellers should at least consider.