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KPMG research shows family-owned businesses are struggling to find external finance to fund investment.
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High-net-worths positioned to invest in family businesses
10 September 2014
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The KPMG International survey has found that 58 percent of family businesses say they are currently seeking external financing to fund their investment plans, but finding the right strategic investment partner is challenging.
According to KPMG, private equity funding often requires the entire business to be sold to maximise 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, many family businesses may not be maximising their growth potential, the firm said.
KPMG have identified high-net-worth individuals (HNWIs) as a potentially underutilised source of funding for family-owned businesses. The firm said these particular individuals often have both experience in family businesses and substantial investment capital.
“Survey results show that the top priorities of HNWIs and family-owned businesses align, making this underutilisation surprising: HNWIs name long-term capital appreciation (37 per cent) as their top driver for investment, while family businesses name long-term orientation towards investment returns as their top investor characteristic (23 per cent),” a statement from the firm read.
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Christophe Bernard, KPMG’s global head of family business said the survey indicates education and awareness of the potential benefits of these partnerships are important first steps to link these two groups.
“This report has revealed some important misconceptions on the sides of both family members and HNWIs,” he said.
“By breaking down some of these barriers, KPMG’s Family Business professionals can help clients to build better business partnerships, encouraging increased collaboration between these two groups across the globe for their mutual benefits,” Mr Bernard said.
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