Investment Preferences of Family Offices

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  • 1. Investment Preferences of Family Offices By Richard C. Wilson CEO & Founder Family Offices Group Richard@FamilyOfficesGroup.com
  • 2. Disclaimer & Limitations Please do not use any advice within this or any other presentation without first consulting your compliance officer or legal counsel. 2  
  • 3. Disclaimer & Limitations 3   PrivateEquity.com |Private Equity Investment Group 1.  Founded in 2007, 110,000 members and top industry website 2.  Leading provider of training, data, conferences and educational resources 3.  Upcoming Webinars: PrivateEquity.com/Webinars 4.  Upcoming Conferences: PrivateEquity.com/Conferences 5.  Certified Private Equity Professional (CPEP) training: PrivateEquity.com/Private-Equity-Certificate/ 6.  Become a Platinum Member today to access webinars like this and much more: PrivateEquity.com/Association
  • 4. Disclaimer & Limitations 4   Family Offices Group 1.  #1 Global Family Office Brand 2.  Founded in 2007, 68,000 Members in 50 countries 3.  1,800 Articles, 275 Videos, 50+ Hours of Audio Interviews, & Millions of Views 4.  Our resources have been used by over 5,000 family offices globally 5.  Face-to-face meetings with over 1,000 family offices in 15 countries 6.  #1 bestselling family office book called The Family Office Book: Investing Capital for the Ultra-Affluent 7.  Family Office Certificate Program: Qualified Family Office Professional (QFOP) designation: http://FamilyOfficesGroup.com/Training
  • 5. 7 Family Office Investment Priorities 1.  Capital Preservation 2.  Growth 3.  Privacy 4.  Taxes 5.  Income ($100M+ Change) 6.  Time Commitment 7.  Privacy 8.  Fraud Risk 5  
  • 6. What is Unique About Working with FOs? 1.  Low level of flow unless you are Michael Dell or Boone Pickens 2.  Opportunity to move quickly when the opportunity is right 3.  The right industry titan can open big strategic doors 4.  Referral networks are key 5.  More Money, More Problems for most resource/team constrained family offices
  • 7. 1.  Standard Investment Banking Approach (90-95% of all offers) 2.  Strategic Valuations (Samsung) 3.  Futurist Valuation/Mindset (Disney/Kennedy) Note: Many my think strategically but try to buy you out at commodity investment banker prices. 3 Types of Direct Investments
  • 8. Direct Investing Motivations 1.  Definition 2.  Examples 3.  Motivations: Transparency, Returns, Competitive Edge, 4.  Pendulum Swing U.S. vs. Asia 5.  Portfolio %’s dedicated to Direct Investing Here is a video I recently recorded while I was in Berlin on direct investing: http://SingleFamilyOffices.com/Family-Office-Direct-Investing
  • 9. Direct Investing Types 1.  Commodity, Strategic, & Futurist Valuations 2.  Diversification vs. 1-3 sandboxes 3.  Minority boring & stable vs. control and 100% buy-outs
  • 10. 1.  Define Each 2.  Creative Terms 3.  Immature Space 4.  Very under-the-radar 5.  Trust and reputation based 6.  Specific to certain industries, and geographies Examples: $1B Consumer Product, $1B Commodity Families, $12B EU Family, & 6th Generation Textile Family Co-Investments & Club Deals
  • 11. 1.  “Simple” Hurdle 2.  Apartment Buildings & Hotels Preferred 3.  Geographical checkbox or complete diversification mentality 4.  Trophy Assets or Networking/Prestige Benefits 5.  Professional Teams + Long-Term Track Records are rare 6.  Many grow out of needing help Real Estate Investments
  • 12. Family Office & Client Examples 1.  7th Generation Textile Family 2.  “Famous” $3B+ Family 3.  $1B+ Commodity Family 4.  $2B+ Product Family 5.  Philippines VC & Tech/Palm Oil Family 6.  #1 family in Peru 7.  $900M PE Family 12  
  • 13. Conducting Due Diligence 1.  Go in with eyes open to the niche and size of business you are targeting 2.  Angel Capital Education Foundation u  Median due diligence time: 20 hours u  Those who spend over 20 hours had a 6x return on capital while those who spent less than 20 hours had a 1.1x return. u  Those who spent over 40 hours/deal on average had a 7x return 3.  Attorney fees can range from $5-20K on the low end up to $100K+ for large deals. Typical fees tend to be between $10K-$25k for most family office deals I have seen.
  • 14. Top Direct Investing & Co-Investing Mistakes 1.  Not Understanding the Risks Before Buying 2.  Not Anticipating Future Rounds 3.  Overzealous Negotiations 4.  Not Saving Dry Powder 5.  Poor Due Diligence 6.  Pouring Good Money After Bad 7.  Not Having an Attorney Review Everything Free Video: http://SingleFamilyOffices.com/Top-Mistakes-in- Direct-Investing
  • 15. Deal flow Sources for Family Offices 1.  Family Office, Merchant Bank, and Investment Bank Referrals 2.  Call Centers 3.  Niche Industry Status, $1B+ Commodity Firm Example 4.  Deal Networks (Axial, etc.) Deal Fatigue: Families are worried about seeing a shopped deal, that has too many layers of fees, non- ideal terms, or just something that has no momentum in the market. Here is a short video on sourcing direct investments: http://SingleFamilyOffices.com/Sourcing-Deals-For- Direct-Investments
  • 16. Crystal Clear Advantage 1.  2,000+ fund managers a year 2.  86% of investors won’t invest in something they don’t understand. 3.  Half of all “passes” on a strategy are due to educational barriers. 4.  Geographical & Sandbox Family Focus 5.  Families are fee sensitive
  • 17. Family Office Resources We offer the following resources on family offices: 1.  Family Office Database Packages: Http://FamilyOffices.com 2.  Qualified Family Office Professional (QFOP): http://FamilyOfficesGroup.com/Training 3.  Family Office Workshop Series: Http://FamilyOfficesGroup.com/Workshops
  • 18. Questions? Richard C. Wilson CEO/Founder Family Offices Group Richard@FamilyOfficesGroup.com Sao Paulo, BrazilPortland, Oregon New York Singapore London United Airlines Clients@FamilyOfficesGroup.com | (212) 729-5067 | www.FamilyOfficesGroup.com Team@PrivateEquity.com | www.PrivateEquity.com