Not so long ago, family offices were dismissed as passive investors with low-profile portfolios comprising apartment buildings, shares and private equity participations. Since then, many have transformed into ‘deal machines’ producing headline M&A transactions. To name but a few, the Bettencourt-Meyers acquired French bank ODDO and, through ODDO, German bank BHF; the Benetton family recently made a bid for Guala Closures together with Goldman Sachs’ Private Equity arm (GS.N). And of course there is JAB, the investment vehicle of the German Reimann family. Over the last six years, JAB has spent an estimated USD 53bn on roughly 14 deals, mostly in the coffee industry.
Are family investors just another type of private equity investors? Not quite. Given their family DNA, they pursue long-term strategies that go beyond the private equity investment horizon of five to seven years. Family investors have peculiar needs, e.g. confidentiality requirements, taxes, management incentives, exit arrangements and shielding off their principals from personal liability. All of these issues must be considered from the start of the investment process and be translated into robust legal terms, taking into account all relevant jurisdictions. Otherwise, a Belgian family member could be held liable for a cartel infringement of the US target company; or the share transfer between two Swedish siblings could result in the extinction of tax loss carry-forwards on the level of their German subsidiary.
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Are family investors just another type of private equity investors? Not quite. Given their family DNA, they pursue long-term strategies that go beyond the private equity investment horizon of five to seven years.