How Private Equity Funds & Single Family Offices work together in Europe

Single Family Offices Private Equity Funds

Single Family Offices and Private Equity Funds in Europe

Many large single family offices are successful private equity investors themselves. Our research team regularly identifies the most important single family offices that invest in companies in order to expand our database. In addition to their own investments, cooperation between single family offices and private equity funds also plays an important role. In the following, we would like to point out the connections between the two investment groups.

1) Co-investments: making growth investments and buy-outs even more successful

Co-investments between private equity funds and family offices are a often-used method to close deals that would otherwise not be possible. There are numerous good reasons for private equity funds to team up with (single) family offices and vice versa. First of all, single family offices bring in their wealth in order to increase the fund’s resources. Like this, deals are possible that exceed the sweet spot of private equity investors. The other way around, single family offices can make you of the assets of third funds to increase their investment means as well. Another good reason for co-investments between the two parties is the combination of industry-knowledge, deal expertise, manpower, and the respective network and strategic contacts. for private equity funds, the industrial contacts of experienced entrepreneur families are of particular interest. Family offices are able to work together with high-class investment managers with deep knowledge of investment processes. Last but not least, co-investments are perfect for entering foreign markets and regions. While some Single Family Offices have become very strong in their home market over the years, cross-border deals pose often new challenges to them. Hence, the cooperation with domestic PEs is a very good opportunity to be active in other countries as well.

Example: Lego Single Family Office, Blackstone and CPPIB acquire Merlin Entertainment for $6.05B

2) Exit options: forming long-lasting relationships in order to prepare meaningful acquisitions

As soon as private equity investors want to sell one of their investments, single family offices come into focus. Of course, this is partly due to the fact that SFOs themselves could invest in companies and be interested in a takeover. But the value of single family offices goes far beyond that. Especially useful is the contact to long-established industrial companies and companies that are (partly) family-owned. Such companies are ideal strategic investors. Such companies do not even necessarily have to be controlled by the respective single family office. PEs and SFOs provide each other with contacts within the framework of long-standing, trustworthy partnerships. This is rarely about short-term financial advantages for the recommender. Rather, synergies can be created that are only conceivable because wealthy families have a very long-term horizon.

Example: German Quandt family office acquires software distributor Ebertlang

3) Fundraising: diversifying the portfolio of high net worth individuals (HNWI)

Private equity investors maintain good contacts with potential investors for their funds. Besides institutional investors, family offices are particularly important in the fundraising process. Private equity funds benefit from HNWI’s large assets, while wealthy families can count on substantial returns. Single family offices often finance several private equity funds at the same time in order to spread the risk. Thus, addressing these investment vehicles is not only worthwhile for large PEs, but also for smaller companies. For family offices, external private equity funds offer the opportunity to diversify the portfolio without having to invest independently. In most cases, this is a real win-win situation.

Example: Partnership between Arnault family office and private equity investor Catterton to create L Catterton

Picture source: Luca Micheli

Relevant family office lists, related to this article

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