A growing number of family offices are becoming major players in strategic direct investments and buyouts with unique advantages.
Here’s what your family offices can do to establish a strong investment:
Understand the landscape to minimize risk.
It’s impossible to avoid risks with any investment, but what you can do is mitigate them. Before jumping into directly buying or investing, research the tools and information you’ll need along the way and familiarize yourself with the company or industry you plan to target. You’re more likely to make an informed decision by conducting a thorough investigation of the risks and exposures associated with an investment.
Without open and transparent communication, your family’s wealth is at risk. A consulting firm that specializes in family offices can offer guidance to help determine which family members should lead various processes with a seller, optimizing your chance for long-term success.
Recognize your competitive advantage.
A family office typically buys and holds versus a private equity firm’s shorter-term investment of buying and then selling within three to five years. For this reason, many potential partners see family offices as long-term investors. This commitment also lets sellers know they can expect a solid relationship and valuable partnership down the line. Additionally, the discretion and collaboration family offices often demonstrate is appealing.
Develop a unique identity for your family office.
Consider targeting a specific business or industry and becoming specialized in that area. Setting your family office apart from others makes you both unique and appealing to a diverse range of industries. Join forces with another family office that shares similar investment interests and/or knowledge in a particular area to establish an especially compelling identity. Also, there are blue-chip private equity firms that might be interested in co-investing.
Particularly in the beginning, it’s advantageous to have insurance specialists and professional counsel assisting with the development of your investment platform. They’ll assist with the due diligence tasks necessary to counteract possible product liability issues, insurance complications, tax issues and outstanding litigation. The investment world is hyper-competitive, and the more support you have in your corner, the more likely your investments are to flourish.
A well-constructed strategy is key if your family office decides to enter the world of direct investing. Contact your HUB broker to learn how your family office can effectively manage the risks.