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Advisory board

Advisory board

Both family businesses and HNWIs say it is hard to find financing deal opportunities and yet their aims match up well. We spoke to the study’s advisory board for their views on how both sides can find each other in the first place and then work well together in the long run.



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Advisory Board


  1. Robin Buckham, CEO of Family Business Australia
  2. Olivier De Richoufftz, President of Business Families Foundation
  3. Gary Deans, Partner, Head of Family Business, KPMG in the UK
  4. Chris Graves, Professor at the University of Adelaide
  5. Beverley Johnson, Partner, Head of Family Business, KPMG in Canada
  6. Kay Kloepping, Partner, KPMG in Germany
  7. Martin Kupp, Professor at ESCP and ESMT
  8. Julian Lange, Professor at Babson College
  9. Benoit Leleux, Professor at IMD and Academic Advisor to KPMG Global Survey on Family Business
  10. Jonathan Levie, Professor at Strathclyde University
  11. Sophie Manigart, Professor at Vlerick Business School
  12. Bill Noye, Partner, Head of Family Business, KPMG in Australia
  13. Albert Jan Thomassen, Executive Director of FBNed (member of European Family Businesses)

The survey found that, while both family businesses and HNWIs are interested in working together, they find it difficult to source the right investors and deal opportunities. Why do you think this is?

Deans: I think one reason is that the two sides work almost within two discrete private networks and another is that they both tend to be very private in their own affairs – that makes it unlikely that the two will meet in the normal course of business.

Leleux: I’d agree. I do a lot of work in emerging markets, for example, and the family businesses in these markets know each other very well and know what’s happening not just in the business but in the families themselves, such as marriages. The main problem is that they will often be reluctant to go to other family businesses for investment because it sends out the message that they need money – and their peers might question why.

Johnson: I think that’s true, but we are seeing some changes with the younger generations. Family businesses have certainly been quite private with information and so that characteristic has led to a lack of awareness. However, when family businesses know each other, often through personal connections, they share stories and often become interested in working with each other. I think there is potential for change in the networks because of the advancement in technology where information is more quickly and readily shared and it’s the younger generations that are leading this.

Kloepping: In my experience, there are two groups of HNWIs. Many of them are entrepreneurs and have had or been part of family businesses in the past – I feel this group recognises the value in investing in family businesses. However, I believe the lack of connection is really in the group of sole HNWIs – those private clients who do not have a business. This is a special group – they are far removed from family businesses and from the idea of investing in family businesses. They do not have the past experience in their own business and most of them are much more risk averse.

So how could the two sides become better connected?

Levie: One idea could be to set up a network similar to the Angel List in the US that connects HNWIs looking for investment and family businesses – this requires families to have a sponsor already, but it would broaden their networks considerably, bringing in investors that they might not otherwise have had access to. The issue with this, of course, is that family businesses need to feel comfortable enough with the idea of spreading the word that they are looking for funding.

Leleux: Yes, you might get some family businesses willing to do that, but for many it would be hard to get comfortable. I think family businesses tend to put themselves in situations where they don’t want to talk to equity investors because of the disclosures they would have to make.

Graves: That’s why I think there is a need for education. The close networks between family business owners mean that war stories about external investors are often shared – there are a lot of myths about loss of control and conflict. If we can educate family businesses about the potential benefits in realising a family’s goals and on what the steps are to make the relationship successful, I think many family businesses would be more open about networking with HNWIs.

Buckham: I think we’d all agree that that is where advisers can assist. If you had a trusted specialist adviser who could outline what kind of funding they might need and then introduce them to someone who might make those funds available thiswould certainly help to bridge the gap.

Lange: The other point is that the two sides need to get to know each other on a personal basis. The family business associations around the world often have committees for particular goals, be they philanthropic or furthering the interest of family businesses. If you had families and HNWIs working together on these committees, they’d not only get to know each other personally, they’d also see the skill sets, contacts and perspectives on both sides. That would give them something tangible to work with.

How proactive should HNWIs be in seeking out investments? Or should the onus be on family businesses?

Graves: It’s a combination of both. What we’re talking about is a supply and demand issue. There is a range of individuals keen to invest and offer their skill set; family businesses often need capital and expertise. There should be a good match, particularly if they have similar time scales and an understanding that both can’t have control. And that’s where advisers come in - they can introduce the two sides. However, both HNWIs and family businesses have to be clear with their advisers that they are seeking opportunities for this to happen.

Noye: That’s true and I would suggest that if you had a hub, similar to the type that has been established in Australia, where legal firms have been providing loans for different family groups as a means of connecting people seeking finance, and where both sides are vetted, you’d have both sides being proactive. I agree that it’s important for both parties to make an effort to connect and engage – a hub is a logical idea that may connect the two, particularly if it was able to categorise investors according to sectors and expertise.

Thomassen: The key point here is that they both share the same values and the report shows this clearly. But they also share a value that perhaps they should get rid of – modesty. They need to be more open and communicative about what they are seeking. And it doesn’t really matter if it comes from the family businesses or HNWIs, both should do it. “You can do this through the media or communications, but one other way that I find works quite well is to use independent directors because they are often more active in other networks, they can make connections.”

What are the opportunities for family businesses in offering equity to HNWIs?

Thomassen: I hear from a lot of families that this not only brings capital, but also discipline and access to new networks. Usually when a new investor gets on board, they also bring a more articulated approach so that the business strategy is more explicit – the family business can really benefit from this. In challenging times, having investors means you also have a partner that you can use as a sounding board or as a way to bring in fresh ideas. So, there are huge opportunities.

Johnson: One of the major benefits is for family businesses looking to expand into different geographies. There are some great synergies to be had if they can find an individual that has experience of, or is located in, that geography. Yet even if that’s not the strategy, HNWIs can bring a great deal of experience, particularly if they are in the same industry. The issue is that there is a perception that if a family business is turning to an HNWI, it’s because the bank has turned them down.

Kupp: There is also a lot to be said for the shared values between the two sides. Attracting HNWIs gives families the opportunity to get like-minded people on board that know what it takes to run a family business, that have the long-term horizons (unlike almost all other sources of finance) and that can offer value beyond equity. An experienced HNWI can give good, honest opinions that can really benefit family businesses.

And what about the challenges?

Thomassen: The biggest challenge is the perception that investors will want control. Yet what I find is that many HNWIs, particularly those with a family business background, are keen to sit at the table, but don’t necessarily need control. The other key point to bear in mind from the outset is there will need to be a split at some point in the future that could be either driven by the family business or the HNWI.

Noye: Yes, the biggest challenge is around equity, but this can be managed by keeping investors in a minority role and putting in conditions around that in the financial structure. Having independent specialists involved who can advise both parties and tailor arrangements accordingly is vital, particularly when it comes to constructing an appropriate arrangement for exit. Many family businesses would want to retain control and full family ownership over the long term and would not want an HNWI in there forever.

Lange: There are challenges and I think the point about exit is valid. There also needs to be a way for HNWIs to receive their returns during the investment. Family business owners often receive dividends or similar and there needs to be a way by which HNWIs receive similar financial benefits. That should be possible because, as the study shows, there is a lot of room for agreement between the two sides.

How should HNWIs approach these kinds of deals and how do they differ from other types of investment?

Kupp: HNWIs should never go into this type of investment unless they are willing to put a lot of effort into understanding the business. Family business investments involve more work than other types of investment and it’s very important to know who you are dealing with. They need to be very cautious about overly pursuing their own agenda. They also need to think about why they are making the investment. What’s their end goal? To tap into networks? Or is it more about the returns and the opportunity itself?

Noye: Yes, HNWIs really need to go in with their eyes wide open. They need access to information such as financial history and forecasts, business plans and the sector, but they also need to look at how professional the family business is. What governance structures are there in place? Is there a family constitution? If family members are employed, under what conditions are they brought in? And is there an independent board?

Johnson: I would add that it’s one thing to have a governance structure in place but another to have a functioning governance structure. For example, a business may have a board but they might never meet. Functioning is a key word – and for an HNWI, this could mean not just having family members in the business on the board.

As we’ve explored, family businesses have a strong desire to retain full ownership. To what extent is this hampering them from capitalising on opportunities?

Deans: I don’t think family businesses see this as hampering them at all. They tend to take the long-term view – if the appropriate financing isn’t available at a particular point, they’ll defer. They take a more conservative approach and are willing to bide their time. It could be argued however that this more conservative and patient approach may mean that growth opportunities are delayed or missed altogether.

De Richoufftz: I agree - they view the opportunities from a family perspective. Ownership for them is often expressed in the intangible benefits it brings of passing the business down to successive generations and having an emotional connection to the business. I would argue that their long-term involvement brings about a better understanding of how to deal with challenges, such as cyclical downturns. So they are strategic and won’t rush into what others might see as an opportunity.

Manigart: Yes, but I do think that some could be more ambitious. Some don’t fulfil their potential because there is an underlying feeling that they might have insufficient financial resources, which means they are sometimes self-limiting.

Buckham: It’s true. Many family businesses are under-capitalised or under-leveraged – often deliberately so – and equity investment by non-family members can be viewed as threatening. As a result, they often rely on self-financing or debt. The trouble with that is that it can slow the growth of the business.

So what compromises can be made on both sides to make partnerships successful?

Manigart: The survey highlights that there is a convergence between HNWIs and family businesses – both are well suited. This goes along with a need for non-bank sources of finance to be developed. I think HNWIs would do well to think about how they could structure their investment in other ways than equity – subordinated loans, for example. That would sit well with families that want to retain control, but also with HNWIs, who would be happy with higher interest rates. For their part, family businesses should be more willing to share information – they need to if they want funding.

De Richoufftz: Yes, they need to be willing to share information, but there also needs to be some understanding among HNWIs that family businesses will sometimes have below market results. That means HNWIs would do well to look at the long-term track record rather than try and base their decision on short-term financials. It’s likely that returns will be staggered rather than linear as these companies are managed less with the goal of short-term appreciation and they tend not to spend money they don’t have.

Kloepping: I’d say the most important thing is that they agree on governance rules. Many don’t have a formal governance structure or an external board. Usually the shareholders really do not decide too much – they are informed once or twice a year. Such a structure is not really acceptable for any external investor. Therefore there must be a common discussion process with shareholders, which may be difficult for the family business because they have to accept a new business structure which they didn’t have in the past.

Leleux: Families need to be a little more transparent, need to let go of a little more of their governance, be a bit more forthcoming with their information, and a little more willing to give equity.

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