Family offices tapped for capital and expertise in global M&A frenzy

In the realm of mergers and acquisitions, family businesses are increasingly eyeing family offices for the necessary capital and expertise, as per a global review conducted by consultancy KPMG. Drawing from the benefits of long-term, patient capital and industry-specific knowledge, family businesses see family offices as strategic partners who can align with their investment goals and contribute to their success across generations, according to the report.

The report reveals that over the past 12 months, approximately 500 family businesses, often supported by private equity firms, have been engaged in merger and acquisition activities. Surprisingly, nearly 60% of the acquired targets were other family businesses or offices, reflecting the trend of family businesses seeking non-organic growth opportunities to propel their operations forward. With the upcoming inter-generational transfer of wealth to younger family members, about 50% of family businesses see non-organic growth as a critical priority in the next three years.

In Australia, the anticipated transfers of approximately $1.1 trillion in the next five years and $2.6 trillion by 2040 underline the vast wealth transitioning within family businesses. Private equity firms have also shown a keen interest in supporting this growth by providing funding and expertise for successful transitions and collaborations. Essentially, such firms can offer necessary resources for off-market deals or those requiring pooled capital, amplifying long-term value creation in a sector known for its consistent performance.

The research, which involved nearly 2,700 family businesses, encompassed Australian family enterprises and examined the evolution of family-owned businesses as well as essential strategies needed to ensure sustainability and growth across generations. Notably, the study found that about 60% of acquisition targets comprise other family businesses and family offices, emphasizing the trend of collaboration between families to capitalize on merger and acquisition opportunities.

While family businesses and offices typically prioritize privacy, there has been a rise in specialized investment vehicles that engage in co-investment with other families to explore merger and acquisition prospects. For instance, prominent families like the Gandel, Forrest, Besen, and Myer families have established collaborative ventures to invest in various sectors to broaden their reach and capitalize on emerging opportunities.

However, challenges can arise when younger family members veer towards new sectors or entrepreneurial pursuits, diverging from managing the legacy enterprise. This shift in focus can lead to conflicts around investment strategies, governance, or philanthropic ambitions. Nonetheless, adopting formal board structures, enhancing communication, and involving family members in business operations can streamline decision-making, improve transparency, and foster multi-generational engagement to ensure long-term growth and sustainability.

To bolster their growth trajectory and facilitate successful transitions, family businesses are advised to cultivate relationships with private equity firms and family offices to gain access to critical funding, strategic insights, and expertise. By connecting with strategic partners, family businesses can navigate the complexities of intergenerational transitions, mitigate disputes, and pave the way for long-term prosperity.