What Are Family Offices Looking for in a Deal?

Family offices look for deals that fit their investment mandate and give them a clear reason to participate. A compelling opportunity alone may not be enough. The family needs to understand the asset, its terms and risks, and what it can contribute to the investment.

Fit the Family's Mandate

Families differ in what they seek. Some focus on industries they know well, while others invest across sectors. Before bringing a deal forward, define the family's preferred sectors, company or asset profile, investment role, and time horizon. A clear mandate helps a family office and its deal partners tell whether an opportunity fits.

For private companies, the family may consider a minority position, a controlling investment, or a partnership with an operator. In a club deal, a lead family office may bring experience and operating skills while other investors contribute capital. This arrangement can let the lead investor participate in a deal that would otherwise exceed its resources. The group needs aligned expectations about roles and terms, and a clear process for decisions.

Look for a Reason to Add Value

Family offices often consider whether their knowledge, connections, or operating experience can improve an investment. A family that understands an industry may be better placed to assess the business and support its growth. That does not guarantee a result. It gives the family a specific reason to consider the deal beyond possible financial returns.

Co-investments can appeal to a family seeking direct exposure and a fund manager's help with sourcing and diligence. The family should understand what it is buying, how the opportunity was assessed, and its responsibilities after closing. See why family offices co-invest for more context.

Assess Partners, Terms, and Risks

For a club or co-investment, evaluate the other investors and partners as well as the target. Look for people whose experience and approach fit the group's plan, with terms that work for its members. Misaligned strategies or conflicting interests can create problems. So can different expectations about operations or exit. Agreeing on roles and decision processes early helps the group work through important choices.

Review the company or asset, proposed structure, financing plan, and assumptions behind the investment case. Ask what could go wrong and how the family would respond. Match diligence to the deal's risks and complexity. The investment committee or relevant family decision makers should review the findings.

Good deal flow depends on clear communication. When a family shares its priorities with trusted sources, those partners can bring opportunities that are more likely to fit. Build relationships with people who know the family's interests and can explain why a deal merits attention. Then apply a consistent screen, as described in how family offices filter deals, before committing time to full diligence.

Read next: How do family offices source direct deals?

Look for a) value-added (e.g., expertise, experience, exits, connections, co-opting competition, political cover or clout) members in the investment, development, and/or exit stages;

Sources: How to Start a Family Office, The Single Family Office. Informational only, not financial, legal or tax advice.