Family Offices are increasingly active in the acquisition market. They are more often classifying themselves as potential buyers because of their long-term investment horizon. We see a trend of formalization, structuring and professionalization. JBR Corporate Finance in Zeist is increasingly being called in as acquisition advisor and sparring partner. In this article you will read about the challenges, opportunities and trends of Family Offices.
Family Offices aim to: relieve and advise the family in various areas such as asset management, legal and financial. The form of a Family Office depends on the size of the family's capital and their short and long term needs. A Single Family Office looks after the interests of one family, provides customization, privacy and independence. However, a Single Family Office is often costly because of the costs for staff, an office, ICT and other support. Personnel is the biggest cost item. To reduce these costs, many families choose to join a Multi-Family Office. Multi-Family Offices offer services for multiple families. These are usually established by professionals, responding to the demand for a middle ground between Single Family Office and wealth managers or banks. More and more banks now have dedicated departments for (Multi) Family Offices. A bank offers economies of scale with a broader service, but this is often at the expense of customization. In a Virtual Family Office all professional (external) advisors of a family work together under the direction of a coordinator, but there is no physical office, hence "Virtual". A Virtual Family Office provides customization and only incurs costs when using services, on the other hand, availability of the advisors is uncertain.
We ask several commissioning Single Family Offices about their (conscious) choice to operate in this form and the advantages and disadvantages they experience. This revealed that families like to keep control and that customization is of great importance. They usually invest in segments that are close to the origin of the family wealth. A family of a Single Family Office indicates that their growing portfolio requires professionalization of the team and other expertise to diversify into other segments. This is difficult in practice: "Besides the fact that it is difficult to find good staff, this also involves high costs. We are therefore now making more use of external consultants in order to remain flexible."
What are the advantages of Family Offices as an investor? They focus on long-term investments. As a result, there is more emphasis on the partnership between the company and the investor and it is important that the vision of both match. In particular, we are seeing a growing interest in Family Offices as investors among family businesses looking to sell or attract investment. One of our clients explained this as follows: "The hands-on mentality, entrepreneurial spirit and involvement of the family behind the family offices we have spoken to really appeals to us. We see that they value the history of our company and the importance of keeping it alive."
Some considerations do need to be made by entrepreneurs when it comes to working with Family Offices. For example, they often have a strong ideal that is difficult to deviate from. This can lead to disagreements about policy after an acquisition. In addition, Family Offices often focus on investments in familiar segments where they have built up their own capital, making investments in niche markets less attractive.
Family Offices usually believe they can act quickly, but in practice this is sometimes disappointing. External "specialists" are often called in (too) late. For reasons of convenience, the choice quickly falls on the in-house lawyer to draw up the SPA and the in-house accountant for the due diligence. The reason for this is usually to save costs and to think that one has sufficient knowledge. Unfortunately, this sometimes leads to missed opportunities and an increased risk of investment. We advise to always consult an (M&A) specialist with the right sector knowledge. Fortunately we see a clear trend of professionalization in Family Offices.