How family businesses can better reposition to attract PE investments—PWC survey

73 total views, 2 views today

Over the last decade, there has been a shift in the way family-owned businesses are financed from traditional means to attracting Private Equity (PE) investments.

The relationship between family-owned businesses (FB) and attracting PE investments can be liken to a two-way chain. An FB can invite a PE as a partner, or a PE invites an FB as a partner.

A recent survey by global consulting and auditing firm, PriceWaterhousecoopers (PwC), on family businesses showed that FB is fast appreciating the benefit from PE firms’ expertise in the areas of governance, financial management, strategic planning, and shoring up companies for sustained success.

According to the survey, 39 percent of family businesses are considering PE investments within the next 1-2 years.

This change in ideology is due to an increased focus on long-term value generation, succession and professionalism at FB, as well as the positive brand perception that an announcement of a PE investment (and re-investment) gives a business.

According to the survey, the most important factors considered when PE’s are looking into family businesses include:

• Identification of core capabilities, and developing them, to create a differentiated position in the market.

• Strong corporate governance that ensures absolute transparency in business operations and separates ownership from management of the business.

• Historical and current financial records that conform to International Financial Reporting Standards (IFRS)

• Compliance with all applicable local and national tax regulations PE firms appreciate the strategic value of good corporate governance and are well positioned to work with FB in strategy implementation such as independent review of existing strategies. This would ensure the FB is better equipped to identify risks and make smart, goal-oriented decisions within their marketplace.

In terms of short-term aspirations, profitability is crucial as 93 percent of the correspondents cited … Read More...