Family offices still like old economy investments

Despite all the hype around the digital economy and how the Covid-19 pandemic has accelerated the transformation to it, family offices are still buying old economy businesses. They see value in these companies, despite the digital onslaught. 

Dunes Point Capital, a family office owned by Tim White, a former senior partner at Blackstone and a private equity specialist, is buying up hardware stores. The New York-based family office just bought DBA Architectural Door & Hardware of New York to add to its other portfolio hardware company, Unified Door and Hardware Group.

The trick for these investment groups will be whether they can adapt these businesses to the fast-growing digital economy…

In fact, Dunes Point has bought a whole host of old-economy businesses since it was founded seven years ago including packaging, lighting, and building companies. None of these businesses fit into any venture-type investment concept. 

Dune Point emphasizes its long-term commitment to its portfolio companies, and a look at when many of its portfolio companies were purchased, White’s investment office doesn’t appear in too much of a hurry to sell these businesses. 

Another investment office buying up old economy businesses is Redwood Capital Investments, a family office based in Maryland. Over the last few weeks, it’s hoovered up a host of motor dealerships in Florida. 

Two years ago, Redwood, the family office of Jim Davis who co-founded Allegis Group, a big staffing and recruitment group, partnered with RV Retailer to create a recreational vehicle retail business in the US. Redwood’s motor dealership strategy is part of a wider vision of growing a recreational vehicle business across the world’s biggest economy. 

Of course, Covid-19 has probably accelerated the use of recreational vehicles, given their privacy and the fact that more people are vacationing in their home countries than ever before. Redwood didn’t foresee that upside, but its old economy strategy might just have become much more profitable because of the pandemic. It would appear Covid isn’t just benefiting digital businesses. 

Pritzker Private Capital is another family office buying profitable old economy businesses. It concentrates on manufacturing, service industries, and healthcare. Family Capital has profiled the Chicago-based investment group’s efforts in this respect in the past. And Paul Carbone, the investment group’s head, is a big believer in family business values when it comes to investing, despite all the hype around venture. 

In Europe, Italian family-owned food holding and investment group, Newlat, recently bid for Hovis, a 134-year old British bread maker. Newlat believes it can add value to an old economy brand. 

All these family investment groups believe they can extract value from these businesses, albeit by playing the long game compared with venture investing. They are often driven by family business values in their acquisitions efforts, like the benefits of long-term decision making and the businesses they buy having strong links to their stakeholders. 

But the trick for these investment groups will be whether they can adapt these businesses to the fast-growing digital economy. If they can, they will cash in as much as any successful startup.