Find out the role that private equity plays in family business. Learn about the variety of different applications that a private equity investor could have for a family business seeking growth opportunities.
Family businesses, like other companies, are often in search of financing to propel growth. As a family grows and changes, the family business must also evolve to accommodate changing family dynamics. The future of the family members, maintaining the independent nature of the family business and the preservation of family unity depend on the growth of the family business and its capacity to generate sufficient profit to all its members.
The term private equity refers to shareholder capital invested in private companies, as distinguished from publicly listed companies. Private equity funds are generally investment vehicles that invest in enterprises, which are not listed on a public stock exchange. An enterprise may seek private equity financing for a variety of applications, from increasing its working capital base in times of business expansion, to developing new technologies and products in order to grow and remain competitive, to making acquisitions of other businesses and buying out certain shareholders in order to restructure the ownership and management of the business.
At a recent Family Business conference in South Africa, Michael Rudnicki, Head of Private Equity at KPMG in South Africa together with representatives from a variety of private equity business discussed the role private equity plays in family business. The points that stood out were:
Alternative sources of funding other than private equity funds include the banking institutions, High Net Worth Individuals or Family Offices (quasi-private equity).