As much as 62% of family businesses in Australia are currently seeking external finance, according to respondents in this year’s KPMG Family Business Global Survey. This means opportunities are very much open for family business owners to connect with high net worth individuals (HNWIs). Just as importantly, more than half of those surveyed said they have already obtained direct financing from HNWIs, and some positive experiences of the same were reported.
“HNWIs have a definite purpose in mind and once they are sure, they make investments,” said one respondent, the CFO of a nationwide poultry business. “We have been able to woo them into investments as our strategies were unique and had a confirmation from wealth management firms that they would do well.”
All our family business respondents agreed that HNWIs are watchful investors who do not panic if the company faces difficulty. The CEO of a South Australian flour company echoed this opinion when saying: “HNWIs are generally patient in their investments and do not believe in getting too involved with the company or project they are funding. They would rather come in to help during crucial times. They will wait for performance results to show and will not plan an exit.”
Australian HNWIs, on the flip side, have had fairly limited experience with family businesses, according to the survey. Less than a quarter of the respondents said they had previously invested in a family-run firm. However, those investors that had taken the plunge reported universally positive experiences. “Family businesses are like a long-term growth strategy for our business, earnings from the investment has been profitable always,” said one HNWI.
The good news for family business down under is that all the HNWIs we surveyed are, to some extent, interested in investing in family-owned companies in the future. However, families need to be prepared to accept investors’ views as two thirds of HNWIs said they would want to be personally involved, while half said they would regularly express their views on management.
The family business sector in Australia is becoming increasingly self-aware that its businesses are different and unique. There is also a growing recognition of this sector by advisors, bankers, private equity holders, HNWIs, media commentators, and government policymakers. This awareness is a good sign for family businesses as it will open up new opportunities for the delivery of better tailored financial products, advisory services, advocacy, and government policy and tax structures to help support them.
“I see the mutual interest [of] family businesses and HNWIs in each other as an exciting development and a whole new market opportunity,” says Bill Noye, Partner, Head of Family Business, KPMG in Australia.