Family Equity
Family Equity Explained Simply
Family equity refers to investments made by entrepreneurial families or family offices in companies, often in the SME sector.
Unlike traditional private equity investors, family equity investors generally do not invest through funds with fixed terms. Rather than a quick resale, the focus is on the long-term development of a company.
Many family equity investors have personal experience in building and managing companies. This often leads to a partnership with entrepreneurs and management on an equal footing.
Why Family Equity Is Particularly Suited for Small and Medium-Sized Businesses
Many small and medium-sized businesses have grown over many years or even decades. They have been strongly shaped by the entrepreneurs who founded and built them.
When a new partner joins or additional capital is needed, it is therefore not just about the price. For many entrepreneurs, the key factor is finding a partner with whom the company can continue to grow in the long term.
Many entrepreneurs are looking for investors who:
- be able to understand business decisions
- take a long-term view
- Respect management and corporate culture
- support strategic development.
Family equity investors often meet these very expectations because they have an entrepreneurial mindset and are not bound by short investment cycles.
When Family Equity Can Be a Good Option
Entrepreneurs often consider family equity when they are looking for an investor who not only provides capital but also supports the company over the long term. Typical situations include, for example:
growth phase
The company continues to grow successfully and needs additional capital for investments or expansion.
Long-term investor wanted
Business owners want a partner who isn't focused on a quick resale.
Management remains on board
The entrepreneurs and management intend to continue to take responsibility and further develop the company in partnership with an investor.
Strategic Development
An additional partner is expected to bring new perspectives, experience, and stability to the company's development.
A Comparison of Equity Investments
Difference Between Family Equity and Private Equity
Family equity is often compared to traditional private equity investments. Both models provide capital to companies, but differ significantly in structure and approach.
Take a structured approach to succession planning
How to Find the Right Investment Solution
Since the succession solutions available on the market vary significantly, it is advisable to follow a structured approach when selecting the right investor.
Talk to different types of investors and familiarize yourself with their approaches. The goal is to develop an understanding of how each investor thinks and operates.
This will help you lay the groundwork for asking the right questions during your discussions—such as those regarding time horizons, influence, or strategic direction.
Once you’ve decided on a type of investment, focus on finding suitable investors within that group. During in-depth discussions, compare specific proposals and determine which solution is the best fit for your company.
Ultimately, you’ll want to select a partner who is a good fit for your company—not only financially, but also strategically and personally.
Why Family Equity Has Emerged as an Investment Model
Over time, many small and medium-sized business owners are faced with the question of how their company’s ownership structure should evolve in the long term. In Germany, thousands of family-owned businesses seek a succession plan or a new partner every year.
In many cases, business owners have traditionally had two main options: selling to strategic buyers or to private-equity investors. In recent years, family equity has increasingly established itself as a third alternative.
One reason for this lies in the origins of many family offices. They often emerge when entrepreneurs have sold their own companies and subsequently invest their capital for the long term. As a result, many family equity investors bring not only capital but also their own entrepreneurial experience to the table.
For many entrepreneurs, this creates a form of investment that combines capital with an entrepreneurial perspective and is more focused on continuity and long-term growth.
FORUM as a Family Equity Investor
FORUM invests in medium-sized companies as a family equity investor and supports their long-term growth.
The capital comes from a Munich-based family of entrepreneurs and is invested with a long-term perspective. The focus is not on the short-term sale of a company, but on its sustainable growth.
In addition to capital, FORUM also brings its own entrepreneurial experience to the table. We collaborate with entrepreneurs and management as partners, with a focus on the long-term development of the company.
Many small and medium-sized business owners are looking for investors who understand their entrepreneurial mindset and don’t view decisions solely from a financial perspective. FORUM’s family equity approach is based precisely on this understanding.
FAQs About Family Equity
Family equity refers to long-term investments in companies by entrepreneurial families or family offices. This approach is gaining particular significance among small and medium-sized enterprises, as many entrepreneurs are seeking an investor who not only provides capital but also supports the company’s long-term development. Unlike traditional investment models, the focus here is not on a short-term sale but on the sustainable growth of the company.
A family equity investor takes a long-term stake in companies and often sees itself as an entrepreneurial partner. In addition to capital, many of these investors bring their own experience in building and managing companies to the table. They provide guidance on strategic decisions and support a company’s long-term development without necessarily pursuing a fixed exit date.
Yes. In Germany, too, entrepreneurial families and family offices are increasingly adopting the family equity approach. They often take stakes in medium-sized companies and support their growth over many years. This approach is gaining in importance because many entrepreneurs are looking for a long-term investor who understands business perspectives and is not bound by short fund cycles.
Family equity investors often invest in established mid-sized companies with a stable business model and long-term growth potential. This approach is particularly appealing to entrepreneurs who are seeking a long-term partner while wishing to preserve the company’s management, corporate culture, and strategic direction.
Private equity investors often invest through funds with a fixed term and pursue an exit strategy after a few years. Family equity investors, on the other hand, typically invest with capital that is available for the medium to long term and without a fixed exit date. Their focus is more on the sustainable development of a company than on a short-term sale.
A family office is an organization that manages and invests the assets of an entrepreneurial family. This includes, for example, investments in companies, real estate, or other types of investments. Family equity, on the other hand, refers to a specific investment strategy: entrepreneurial families or family offices make long-term investments in companies and support their development. Many family equity investors are therefore family offices.
For many entrepreneurs, family equity offers an alternative to traditional investment models. In addition to selling to strategic buyers or private equity investors, some entrepreneurs opt for investment from a family office. These investors often take a long-term view and support companies over many years.