Trying to catch the attention of a wealthy family or family office? Try finding a solid company or property they can invest in directly, or a like-minded family with whom they invest jointly.
"Trust is a very big issue for very wealthy families, and it's resulted in more direct investments and co-investments," says Joshua Cohen, senior managing partner of Acaciawood Consulting, who works closely with family offices. ''Families want to be in control, and they want to invest with families who share the same values they do."
Cohen spoke at the Association for Corporate Growth's Family Offices Luncheon.
HARD ASSETS IN, HEDGE FUNDS OUT
Family office experts agree that wealthy families are increasingly interested in hard assets, less interested in hedge funds and more likely to band together for "club deals," as they call co-investments.
And if a quality company with exceptional management is for sale, family offices with a long-term investing horizon are often willing to pay a premium -- and cash, according to the experts at the luncheon.
"They prefer to pay cash because they don't want to burdened by large amounts of debt," says Alan Wink, director of capital markets for EisnerAmper, an accounting and consulting firm that works with family offices. "They also want to invest in a company where the management team stays on. They don't want to run a company."
Unlike private equity companies, family offices are likely to only own one or two companies, Wink notes.
TEAMING UP
Wealthy families are drawn to invest in "club deals" with like-minded families to gain expertise in fields they may not be familiar with and to diversify their assets, says Sol Lipshitz, executive director of Anchin Capital Advisors.
Families feel comfortable with investing with a group they have so much in common with, adds Joshua Roach, managing director of Phi Group Capital. "The most important thing for these types of families is long-term alignment of interests," Roach said.
Some families still have to overcome a "fear factor" when it comes to co-investing, Lipshitz says. "Going in with another family means they aren't going to invest with an experienced private equity or real estate firm who has done hundreds of these deals before," he explained. "So there may be added risk."
To compensate, family offices are increasingly luring private equity veterans going to come and work for them. "Families want to mitigate risk, and someone with private equity experience knows how to find and negotiate deals," Wink says. "That's very important if you only have one or two unleveraged companies."
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