Actionable Ideas for Companies and Sponsors

Family-Owned Businesses Becoming an Increasing Source of M&A Targets

Founder and family-owned businesses will be an increasing source of M&A activity, especially for financial sponsor buyers. A recent survey of 500 mid-sized family-owned businesses cited that one-third expect to transition ownership of their businesses within the next five years, and over three-quarters expect to transition within the next ten years. Because there is less inclination by the next generation to join family enterprises, these business owners are increasingly looking to outside parties when contemplating transition. This succession dynamic represents a natural point of entry for financial sponsor capital, and more than 40% of the businesses surveyed have already contemplated a sale to private equity. This trend will further accelerate as the economy moves past the peak of the business cycle and existing owners lose interest in weathering another storm.