The KPMG Family Business Global Survey 2014 found that 65 percent of American family businesses had previously offered equity to external investors.
Further from these experiences, family businesses in the U.S. do not merely view this type of investor as a necessity, but rather a sought out one.
“HNWIs will invest money for the reason of simple investment. They do not tend to interfere with any decisions of the company knowing it is a family-run business. However, we encourage them sometimes to help us in decision making if they are from the fields of our interest,” explained one of the survey participants, a CEO of Chicago-based family business with experience in obtaining finance from an HNWI.
This is a fascinating take on the assumed family business and HNWI relationship, where investors believe family businesses are usually reluctant to engage such an investment. Other countries surveyed found family businesses to be wary of how much interest in and control over the management of the business a HNWI investor would show.
USA family businesses, on the other hand, seem to be the instigators in the relationship and welcome the expertise of the external involvement. Interestingly, this could be due to just how heavily invested the families tend to be in the family business in America – of those surveyed, 50 percent had a family member as a CEO and 76 percent were majority family-owned. Ambitious family businesses could be looking to gain external expertise to ensure that the business thrives from the best practices.
In line with the receptiveness of American family business to involvement from investors with knowledge to share, one Cleveland-based HNWI stated that “I have been thinking of investments into family businesses as there is personalization where you can share your ideas and speak about your contributions based on your market knowledge, and can offer to reshape business processes for better outcomes which is well accepted by owners and family members.”
At the time of the KPMG Family Business 2014 Global Survey, 50 percent of HNWIs surveyed had invested directly into businesses previously, with half of those investments being into family owned businesses. 90 percent of the HNWIs stated though, that they would be interested in investing if they were able to express their views in the management of the company. So, as it stands, both sides are on the same page when it comes to investment.
There appears to be an interesting dynamic among family businesses and high-net-worth individuals. As family businesses and investing become more global, both tend to look for opportunities to invest together to build long-term, sustainable, and growing value-added relationships.
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