Private Equity Firms Facing Strong Competition from Family-run Investors

Family-run Private Equity Firms Long-term Game Plan

These families have notoriously deep pockets and are well-known for seeking to secure their assets for future generations. This desire shows itself in a long-term game plan, including a willingness to wait for good returns, which naturally puts them ahead of the 'fast buck' mentality of PE businesses.

German Family Investors Creating an Empire in the Hot Drinks Sector

For example, Joh A Benckiser (JAB), the investment organisation of the billionaire German family Reimann, bid for the Douwe Egberts brand in recent months. By doing so it will create an empire in the hot drinks sector that will genuinely challenge the current market leaders of Mondolez International and Nestle, even if the strategy takes some years to fully play out.

Family Funded Business Investments are Likely to Continue Growing

The Beverage and Food Industries Continue to be very Attractive Investments

Allowing for real gains from competitive activity, particularly for big-hitting investors with sector specific experience. JAB has already hired a number of industry veterans to manage its investment, including former CFOs and CEOs of Mars.

Other Family Owned Private Equity Firms have the Ability to do Similar Deals 

Most notably, Maxingvest, who are the investment arm of the Herz family. This family owns the massive Tchibo retail business. Equally, a family-owned investment business in Belgium has just invested heavily in a range of consumer businesses, including Remy Cointreau.

Further Options are Available to Family Private Equity Firms who Choose to Co-invest 

Such as 3G, the Brazilian PE firm, which linked up with Berkshire Hathaway to buy Heinz earlier this year for a cool $23.2 billion. The PE ratio for the deal was calculated at 14.6, which is higher than most traditional PE firms will accept.

Family Private Equity Firms Benefiting from Long-term View

Representatives for these powerful families point to the benefit of having a long-term view and the necessary assets and tools to make these investment deals work. Many have a time frame of between 15 and 20 years for their investments to work.

Previous Dominant PE Firms Feeling the Pressure

As result, the previous dominant forces of PE firms are being left in a weak position and desperately attempting to hold ground. They will need to re-evaluate to maintain their viability in an increasingly competitive market.

Written by Ross Stokes of Circle Square - Financial Recruitment

Private Equity Analyst    Investment Executive    Private Equity Associate    Investment Manager    Investment Director / Principal    Private Equity VP / Associate Director