A classic family capital deal

Koch Equity Development’s move to buy a sizable minority stake in Getty Images bears all the hallmarks of a classic family capital investment, with two prominent families coming together to guarantee the long-term success of a family business.

The investment group owned by Koch Industries is to invest $500 million in Seattle-based Getty Images for a non-controlling investment in the company. Getty Images is one of the biggest stock photo agencies in the world, with revenues of $836.8 million for the year up to the end of September 2017, according to Moody’s Investor Service.

The deal is: ‘another great example of KED supporting a family-controlled business with a unique, non-controlling equity investment’

Last September, the Getty family bought back ownership of Getty Images from private equity group Carlyle, ending ten years of outside control.

Mark Getty, co-founder and chairman of the photo agency said in a statement accompanying the announcement: “In September we announced my family were resuming control of Getty Images – a business that bears our name and one that we fervently believe in. KED demonstrated they share a belief in Getty Images, a long-term outlook and focus on growth.”

Given Koch Industries is 100% owned by the Koch family, KED is effectively a private investment group for the ultimate benefit of the family. And the family business side of Getty Image – the Getty family is now the biggest shareholder – no doubt influenced KED’s decision to invest.

As Matt Flamini, KED’s president said in the same statement: “This transaction, like American Greetings, Meredith, Guardian and others preceding it, is another great example of KED supporting a family-controlled business with a unique, non-controlling equity investment.”  

The patient capital side of the KED investment is likely to have influenced Mark Getty’s decision to sell a minority stake in the business. He was known to be frustrated with the debt build-up under private equity in the business he co-founded with Jonathan Klein in 1995.

Getty is the grandson of one of America’s most famous entrepreneurs – oilman John Paul Getty, who, in the 1950s became America’s wealthiest individual. And Koch Industries came out of the initial efforts of Fred C. Koch, who made his fortune from developing new techniques in the oil refinery business.

The two families haven’t interacted from a business perspective, or at least not publicly, until the Getty Image deal. But, Frederick Koch, the eldest of the four Koch sons fo Fred, bought Sutton Place, a vast Tudor manor house in Surrey, England, which was once the residence of Mark Getty’s grandfather. Frederick has since sold Sutton Place.

Charles and David Koch are the two biggest shareholders of Koch Industries, each owning 42% each, whereas the two other brothers, Bill and Frederick, sold their holdings in the family business in the early 1980s.