A new KPMG International survey has found that 58% of family businesses are currently seeking external financing to fund their investment plans, but finding the right strategic investment partner can be challenging.
Private equity funding often requires the entire business to be sold to maximize value in the event of an exit, and corporate strategic partners often see any investment as part of a longer-term plan to secure full control. As a result of these limitations, according to KPMG, many family businesses may not be maximizing their growth potential.
KPMG has identified one possibly underutilized route for investment with the involvement of high-net-worth individuals (HNWIs), many of which have family business experience as well as significant investment capital. It is estimated that there are up to 14 million high-net-worth individuals around the world with around $53 trillion of wealth. Survey results show that the top priorities of HNWIs and family owned businesses align, making this underutilization surprising: HNWIs name long-term capital appreciation (37%) as their top driver for investment, while family businesses name long-term orientation towards investment returns as their top investor characteristic (23%).
“From the survey, education and awareness on the potential benefits of these partnerships have emerged as important first steps to link these two groups. This report has revealed some important misconceptions on the sides of both family members and HNWIs,” said Christophe Bernard, KPMG’s Global Head of Family Business.
Other key findings of the survey include:
- 44% of HNWIs have previously invested in a family business and the vast majority (95%) say that it has been a positive experience in comparison to their other investments.
- More than three-quarters of survey respondents (76%) say that the family holds a majority stake in the business.
- 60% of HNWIs are looking for investments with reasonable risks and reasonable returns, and are focused on long-term capital appreciation.
To view the survey results click HERE.
KPMG, the audit, tax and advisory firm (www.kpmg.com/us), is the US member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s member firms have 155,000 professionals, including more than 8,600 partners, in 155 countries (www.kpmg.com).
The survey was conducted by KPMG in association with Mergermarket and surveyed 125 family businesses about the types of investment they require, their investors of choice and their previous experience of receiving investment from HNWIs or other family businesses.
2014 PEPD • Private Equity’s Leading News Magazine • 9-9-14
