When 111 U.S. family offices were surveyed by Fidelity Family Office Services last year, 98% said they expected to maintain or increase direct investments over the next three to five years.
Buyers are also coming to the U.S. from abroad. A Qatari-backed firm snapped up the Montage Beverly Hills hotel last month, while Africa’s richest person, Aliko Dangote, plans to diversify his wealth by opening an investment office in New York.
The decision to sell a family business isn’t made lightly. The process of finding a buyer, agreeing on a price and completing the transaction can take a year or more.
Some families also aren’t sure they want to let go of their life’s work. That’s driving investors to make more creative pitches.
“We’ve seen a number of families that are reluctant to give up control immediately but may be willing to sell a minority position first, then after getting comfortable, sell a controlling stake over time,” said Brian Frank, who runs Declaration Partners LP, which manages Carlyle co-founder David Rubenstein’s family fortune.
“Clients are more open right now because the market conditions are so good,” said Lisa Featherngill, head of legacy and wealth planning at Abbot Downing, a unit of San Francisco-based Wells Fargo & Co. But “they’re not going to take the deal until it’s the right deal.”
OK Boomer
In this environment, some business owners are getting offers they can’t refuse.
“There is an acceleration of a desire to sell,” said Joan Crain, global family wealth strategist at Bank of New York Mellon Corp., citing “clients who were lackadaisical” but “are now very motivated.”
If conditions change, advisers want to make sure they’re not blamed for failing to warn clients to sell when times were good. That’s particularly true for the many Baby Boomer business owners who are now approaching retirement age.
Older owners have plenty of good reasons to unload their businesses now, their advisers say. Many are already worried about the future of their industries, especially the threat of disruption from new competitors or technology changes -- “getting Amazon-ed,” as Rowe puts it. Aging business owners often realize that a buyer with deep pockets is more likely to have the expertise and resources to keep up.
Many Boomers hoped their children would take over at some point, but Rowe and others said that’s happening much less than it used to. Advisers often need to offer a reality check to owners whose children aren’t stepping up to take over. “We can see objectively that’s not going to happen -- time is running out,” Crain said. “Sometimes we have to nudge them.”