Family offices could emerge as a valuable exit option for owners

Business owners across the UK are struggling to attract investment to their businesses or, if they are looking to exit, to find viable buyers. However, while much coverage is given to private equity and corporate buyers, family offices could provide a valuable alternative.

Family offices are established by substantially wealthy families seeking to manage their wealth. The family office, which consists of a diverse, highly experienced investment team, seeks to safeguard and enhance the family’s wealth for future generations, providing services including wealth management, estate planning, multi-generational support and asset protection, among others.

They are typically highly discreet operators, meaning a lack of exposure compared to other buyer classes such as private equity, but they are increasingly active in private M&A. According to a recent report, more than 60 per cent of family offices with private equity investments have a portion of these in private assets.

Angelo Robes, Founder and CEO of the US-based Family Office Association, observes: “We’re seeing direct investing playing a larger and larger role in the portfolios of a growing number of single-family offices. Globally, all signs point to single-family offices investing billions upon billions of dollars in acquiring privately held businesses.”

A growing trend in UK company exits has been owners seeking stability for their businesses post-sale, something that has contributed significantly to the increasing popularity of Employee Ownership Trusts (EOTs). Whereas private equity buyers will seek to exit an investment in around 5-7 years (and therefore may make significant changes as soon as they acquire a business to drive quick growth), family offices are far more patient, with their focus on multi-generational growth meaning they typically hold onto their investments indefinitely – translating to far greater stability for the business post-acquisition.

Over the past decade, the UK has been the most popular location worldwide for direct investments by family offices, with their considerable wealth meaning that activity continued to grow even during the COVID-19 pandemic, when many other buyers paused their M&A plans. As activity grows, family offices are increasingly teaming up with one another to ramp up their investments and target even bigger deals and are investing in areas such as healthcare and biotech, technology, infrastructure and energy.

For owners of businesses with stable profits, this increase in UK activity demonstrates that, when exiting their business, family offices should be considered potential buyers. At a time when it is increasingly important for owners to evaluate whether a buyer’s approach aligns with their business objectives and goals, family offices – with their stability, long-term focus and extensive experience – could offer the cultural and strategic alignment that exiting owners are seeking.

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