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Competition between family offices and private equity firms intensifies – research


An interesting piece of research has come out of Germany, which shows the growing role of family offices in direct private equity deals. The development has got some private equity firms there worried.

According to research from one of Germany’s biggest private equity groups, Deutsche Beteiligungs (DBEG), and FINANCE magazine, family offices are competing more fiercely than ever for middle-market deals in Europe’s biggest economy. According to their research, more than 80% of private equity firms said family offices and industrial holding companies (often owned by families) had “made life difficult” for private equity investors in the competition for mid-market businesses in the last 12 to 24 months.

“The figures suggest that at least those family offices that have adopted highly professional private equity structures have narrowed the gap separating them from traditional private equity firms,” says the DBEG research. “Family offices are being seen as competitors not only in bilateral talks with the sellers of mid-market companies, but also, and almost just as much so, in auctions.”

The DBEG research also highlighted the private equity boom in Germany, with more investors being attracted to Germany’s Mittelstand businesses, many of which are family owned. Last year, nineteen out of 47 management buyouts in the mid-range segment of the German buyout market were family businesses.  The acceleration of buyouts in the family business sector in Germany started in 2016. Previous to that, says DBEG, barely more than one in ten transactions involved a family-run business.

“Founders and family business owners are increasingly starting to realise what sort of contribution financial investors can make to their companies’ further development”, said Torsten Grede, a spokesman for DBEG.

Overall, there was also a big increase in buyout activity in Germany. With 47  mid-market transactions last year, the highest ever total and compared with 35 the year before.

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