Great news for the family business sector is that high net-worth individuals (HNWIs) are generally very happy with their investments in family businesses, so the creation and renewal of such relationships moving into the future is looking bright. This is a key finding from our 2014 KPMG Global Family Business Survey.
The overwhelming majority (95%) of the HNWIs canvassed as part of the survey who have invested in a family business view the experience positively in comparison to their other investments, with 55% saying their experience has been very positive. This is reflected across different regions, with the vast majority of HNWIs in both developed and emerging markets rating their experiences positively.
Comments from respondents suggest that this positive experience can be attributed to the level of personal engagement the family has with a HNWI investor, as well as the alignment of interest in furthering business goals. “The overall experience was positive,” says a New Zealand HNWI. “The speciality of family-run businesses is that they are long-term oriented and for these firms, reputation is above all, so our money invested has sure returns in the long-run.”
A South African HNWI who has also invested in family business says of his experience: “[It was] very positive, we’ve had better deals with family businesses, they are pretty open in their views and functioning and we’ve not experienced any sort of conflicts.”
“It was a great experience as the family business owners are very open and maintain a good relationship with all their contacts,” comments a Chinese HNWI. “They never fail to give importance to their investors, which encourages more investment.”
Most HNWIs invest in family businesses on a personal rather than a more formal basis. This is possibly because many HNWI investments are made on the basis of personal recommendations or through informal networks of contacts.
An Argentine entrepreneur comments: “We invested personally as we knew the family running the business and were sure about the returns and profitability”.
A Brazilian HNWI adds: “In both cases, I have invested in family businesses that were familiar to me and I financed their business expansion.”
A Saudi HNWI who is yet to invest in family business says: “It would be highly likely that I would invest in a family business if I knew a family member or had information on the market value of the company based on its products. The industry experience would not matter to me as talent can be sourced or is already present in the family.”
Nevertheless, there is some regional variation. HNWIs based in developed markets in Europe and the Asia-Pacific region are more likely to invest in a more informal way, while those based in North America and in emerging markets tend to invest within a formal structure using investment managers to guide their decisions.
To all the HNWIs out there: how important is personally knowing a member of the family business to you in terms of deciding whether or not to invest in the company? We’d enjoy hearing your views…