PEGs and Family Offices are BUYERS!
Family OfficesFamily offices can be a single-family office or a multi-family office. Single-family offices are generally set up by very wealthy families and charged with managing the family’s wealth. When people think of single-family offices, the names Rockefeller, Ford, and Gates come to mind in the U.S.; Arnault (LVMH), Pinault (fashion) and Albrecht (ALDI) in Europe; and Lee (Samsung), Wan-Tsai (Cathay) and Chung (Hyundai) in Asia. Each of these families are worth many billions of dollars and you’re unlikely to run into anyone even remotely connected to them at any picnic or wedding or football game you might be attending, especially if you’re in the nose-bleed seats. But there are countless other families that, although not nearly as wealthy as these, are wealthy enough to set up family offices.
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Private Equity Groups
A private equity firm makes equity investments in operating companies using various investment strategies including buyouts and growth capital. Each PEG raises funds from investors and invests in businesses that meet the PEG’s investment criteria. At the moment, PEGs are flush with cash and very active in the market looking for good businesses to buy.Some PEGs bring their own management team to a deal and take the existing owners out completely. Others want to control the business they invest in but want the founders, current owners or management team to stay on and continue to grow the business. Both types of PEGs should be on your list of buyers. PEGs differ from family offices in that PEGs focus almost exclusively on acquiring businesses whereas family offices are generally less focused and will invest in a broad range of diversified opportunities including less-risky vehicles such as corporate and municipal bonds, equities in large, publicly-traded companies, commodities, precious metals and real estate. But like family offices, PEGs come in all sizes. The smaller ones are where we focus. We’re constantly on the receiving end of inquiries from small and mid-size PEGs looking for businesses that have between $2 million and $10 million in revenue and a minimum of $250,000 to $500,000 in discretionary earnings. These are lower Middle Market businesses that represent the sweet spot for a handful of professional business brokers.
How Many PEGs and Family Offices are Out There?More than you think, mate! If you’ve been paying even a modest amount of attention over the past three years, you may have noticed the equity markets around the world have been surging. That fact alone means there is more and more money out there looking for a profitable place to park itself. And that fact means that there are more wealthy individuals and families that are investing in PEGs or setting up family offices or engaging with multi-family office firms.
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“In 2017, the world’s ultra high net worth (UHNW) population – individuals with a net worth of $30m or more – rose by 12.9% to 255,810 people, a sharp acceleration from a year earlier. Their combined wealth surged by 16.3% to $31.5trn, implying healthy gains in average net worth.”And as long as this current economic expansion has been, with the U.S. president appearing to come out of that recent impeachment unpleasantness in better shape than ever, the Brits regaining control of their destiny and even the Greek economy showing signs of a pulse(!), aside from the troublesome issues emanating from various Chinese precincts – Hong Kong, Wuhan, Spratly Islands, etc. – there is reason to believe that the ranks of the wealthy will continue to grow.