Taking the Longer-Term View on Family Capital
Our members gathered at the FOX Global Investment Forum last month to discuss investment opportunities and the benefits of taking a longer-term view in their deployment of family capital. They came for an investment update and to see what other families were investing in. What was reinforced by the attendees was their growing interest in buying operating businesses again and their desire to co-invest with other families in some of these opportunities.
More families today are seeking to co-invest with other families where there is a greater alignment of interests, greater control, and more flexible terms than investing in external funds or vehicles. This form of investing is appealing to families that have sold their operating businesses and are looking to redeploy their capital in businesses with predictable cashflows. It is also appealing for business-owning families that are looking to invest in new businesses so they can diversify their holdings.
Attendees saw a great diversity of opportunities and heard about a surprising number of success stories. Of the six primary deals presented at last October’s FOX Fall Forum, all had raised additional capital from other investors and all were moving forward with the business plans they had shared at that meeting.
Global Interest In American Companies
While FOX members in the United States have shown great interest in learning about investments sponsored by other member families, families from other parts of the world are showing keen interest in middle market companies in America. They view the U.S. economy as the most stable for investing, and they are eager to access these business opportunities. Companies in the $30-50 million range with stable revenues and reasonable profits are in great demand, both here and abroad.
A Market Place for Direct Investment Opportunities
There seems to be a clear demand for a reliable marketplace where families can bring their co-investment opportunities. FOX has conducted three meetings of what is now called the FOX Deal Exchange Network. The Network has grown from three deals offered in October 2010, to six deals in October 2011, to seven in May 2012 with several others surfacing from the networking at the meeting.
What we didn’t expect to see so soon were family businesses coming to build relationships because they know they will be raising capital in the future. Business owners who are reluctant to sell to private equity firms are looking for sources of patient capital from other families who take the same long-term view about the value of investing in solid business enterprises.
FOX intends to continue to sponsor a network to support families co-investing with other family groups who take the long-term view on direct investments.
We welcome your observations and comments.