Raising capital from family offices
Private Equity Panel: Hard Lessons on People and Direct Deals
Family Office & Investor Panel: Key Lessons from Private Equity Experts on Market Shifts and Inve...
Family office principals, private equity investors and sponsors who are weighing acquisitions or direct investments and want to hear what went wrong for others.
The short version
One panelist described a third acquisition, done at the end of 2020, that turned into an expensive lesson. Because the team could not meet in person, the acquired company struggled to absorb the culture and vision. Talent left, and the time to value ran much longer than expected. The panelist's advice is to prioritize physical proximity in an acquisition.
The panel also covered other hard lessons. These included backing a CEO who could pivot, the value of controlling information, and the strain the pandemic put on multifamily investments. Panelists also warned about investing in industries you do not know, and about the work involved in running direct investments such as infrastructure.
Five points worth keeping
- Back the leader who can pivot. Gary invested in a company whose game plan he doubted. He backed the CEO anyway because the CEO was a good thinker who listened, and the CEO did pivot. For Gary, the jockey still counts most.
- Control of information matters. Gary said he was surprised by how important it is to control information and use it well. He said he saw this apply across different kinds of companies.
- Be in the room for acquisitions. One panelist's third acquisition, at the end of 2020, was done without in-person contact. The result was regrettable talent attrition and a longer time to value. Remote work can come later, but the early relationship benefits from being together.
- Expect shocks to real estate. One panelist said multifamily markets that had been pretty good deteriorated during the pandemic. Local conditions meant they had to hire more people just to collect money. Interest rates also rose faster than expected, though their instruments were 99% fixed rate.
- Know what direct investing demands. Panelists said families get caught investing in industries outside their expertise. Going direct can look fantastic on paper, but it takes real work in due diligence and in running the asset after the purchase.
Said on the call
"you've got to prioritize physical proximity in an acquisition. Sure, you can go remote later, but there's nothing like being in the room together."
"I just think it's important for people to know what they're getting into before they do that. You don't know what you don't know."
"I think one of the problems that family offices have is they don't necessarily see what's going on outside their area."
Key facts
- One panelist's third acquisition took place at the end of 2020 and could not be done in person.
- One panelist said their holdings were 99% fixed rate instruments when interest rates rose quickly.
- One panelist said rent collection became much harder in their markets during the pandemic, which forced them to hire more people to collect money.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Family Office & Investor Panel: Key Lessons from Private Equity Experts on Market Shifts and Inve.... Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around acquisition documents, direct investment structures and landlord and tenant rules. Do not use AI to write your own legal agreements.
Related questions
- How do I find the decision maker at a family office?Start by meeting the family through advisors, events and the people who manage their investments.
- How long does a family office take to make a decision?There is no standard timeline, and I would not trust anyone who gives you one number.
- What is the difference between single and multi-family offices?A single family office works for one family and is built the way that family wants.
Questions about this video
What went wrong with the acquisition made at the end of 2020?
The team could not meet in person, so the acquired company struggled to understand the culture and vision and to feel valued. The panelist said this led to regrettable talent attrition and a longer time to value.
Why did one panelist say interest rate rises were less damaging?
The panelist said they were caught off guard by how fast rates rose. They were in 99% fixed rate instruments, so the impact was small.
What is the risk of family offices investing directly?
Panelists said direct investing can look fantastic on paper but is hard in practice. It takes work in due diligence and in running the asset once it is acquired.
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