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BW Businessworld

Scarce Funds For Family Businesses

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If you in your family business then you should be proud that you are part of a sound force that helps generate 70 per cent of the global GDP! On the down-side, you might struggle to find investors to expand your business.

A new KPMG International survey has found that 58 per cent of family businesses are currently seeking external financing to fund their investment plans, but finding the right strategic investment partner is not a piece of cake.

Private equity funding often requires the entire business to be sold to maximize value in the event of an exit, and corporate strategic partners often see any investment as part of a longer-term plan to secure full control. As a result of these limitations, many family businesses may not be maximizing their growth potential.

KPMG has identified one possibly underutilized route for investment with the involvement of high-net-worth individuals (HNWIs), many of which have family business experience as well as significant investment capital. It is estimated that there are up to 14 million HNWIs around the world with around $53 trillion of wealth.

Survey results show that the top priorities of HNWIs and Family Owned Businesses align, making this underutilization surprising: HNWIs name long-term capital appreciation (37 per cent) as their top driver for investment, while family businesses name long-term orientation towards investment returns as their top investor characteristic (23 per cent).  

"From the survey, education and awareness on the potential benefits of these partnerships have emerged as important first steps to link these two groups. This report has revealed some important misconceptions on the sides of both family members and HNWIs," said Christophe Bernard, KPMG's Global Head of Family Business.


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