The Rise of the Family Office
Over the last ten years, private investors with significant personal wealth have grown in their prominence as a bona fide capital market. Unburdened by the mandates and time-constraints of a typical private equity fund, these investors, known as Family Offices, have also become a highly coveted resource for growing companies. Regardless of AUM, location, generational heritage or industry focus, family offices want to invest not only from their pocketbooks but also from their experience.
Our firm works with a large and growing number of family offices interested in high-quality, curated direct deal flow. We are constantly reminded that the strategic advantage is their Wealth – not just in cash, but in experience. In this article we will discuss the ways in which Family Offices can invest in issuers from their pocketbooks and industry experience.
Family Offices may derive their wealth from recent monetizations or generations of financial prominence. Regardless of the source of wealth, our firm has observed that the contemporary social and political environment plays an important role in investment mandates and decisions. Family Office principals are check writers and money managers. It is their principal that is being invested and the decisions that are being made in direct investments are by nature, personal.
As a result, the impact associated with investments is often a consideration. Will the use of funds better the world around us or impact the world in a manner consistent with our political views? Will this investment survive or be unduly influenced upcoming changes in political parties or social trends? Fill in the blanks with your views or passions and we find that these influences will be a factor when its time to invest. So let these issues stay front of mind when considering a new investment to save time and effort later on in the due diligence process. Let the impact of an issuer’s business or use of funds act as a screening tool when considering new investments.
Governance and Partnerships
More likely than not, the capital invested by a family office in a growing company is arriving at an inflection point in the company’s life cycle. This capital is likely providing the fuel to grow the company exponentially from its current revenue profile to new heights. The execution of the company’s business plan is critical to this accelerated growth. While my next comment may seem obvious, the Family Office should seek board representation or observation rights when appropriate. This governance can help the Family Office (or its advisors or staff) monitor execution of the business plan and potentially leverage its resources to help the company avoid pitfalls during this growth phase.
Another collateral benefit of the Family Office’s involvement is the potential to leverage its connections, network, and other resources in assisting the company’s growth. We would suggest that Family Offices look for ways to structure joint ventures or partnerships with the corporate issuer to monetize this collateral value.
More than a Capital Source
In summary, the family office world is growing every year in its viability as a recognized capital market. The wealth background, investment interests, social concerns and current mandates of a Family Office are critical factors when deciding which offerings are worthy of due diligence. The real win in a direct investment is for a Family Office to aligned itself as a partner who will deploy its expertise, resources and cash capital into helping grow the corporate enterprise.
Crestmont Investments is a New York based partnership that serves as a sponsor and placement agent presenting bespoke investment opportunities to over 400 family offices and select private investment firms. Crestmont relies on partnerships with family offices, investment banks and wealth advisors to source, evaluate, arrange and structure direct investments across a variety of industries with a primary focus in all forms of energy and natural resources, healthcare and life sciences, manufacturing and technology. Members of Crestmont are affiliated with Weild & Co, a registered broker/dealer and member of FINRA.