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Family values prove vital when firms choose financiers says research

By James Beech

Global family business leaders consider the sharing of values to be just as important as the terms, cost and value of the deal when selecting their funding partners, says new research.

Matching values and objectives was key to a significant 68% of international family business executives interviewed for Family Business: Financing For Growth Report 2017, by Campden Wealth in partnership with global investment firm KKR.

The vast majority of executives (74%) said they looked for a capital partner who can demonstrate a good understanding of their business and can help it grow by adding strategic benefits, such as skills and expertise (70%).

“I would expect [capital providers] to have a long-term approach to our company, with a very clear understanding of our values and what we are all about,” a seventh-generation European family business executive told Campden researchers.

“If they fall outside that, we will reject them as we would any other team member who didn't live by our values.”

These “soft requirements” upon which family businesses evaluated potential sources for funding their expansion were equally as important as “hard requirements”, the report said. The critical requirement to satisfy 88% of executives was the terms of funding while 86% said they compared their options based on cost. Maintaining control over their business and influence its governance when making funding deals was vital for 85% of executives.

However, Asia Pacific executives placed even more of a priority on soft requirements than their western counterparts when selecting funding partners.

“They particularly value the sources of capital that can add a strategic benefit to their firm beyond the terms of contract (85%) and have a good understanding of both their business (also 85%) as well as the values of the family (another 85%),” the report said.

"Word of mouth and personal recommendation go a long way… Providers' prior relationships with the family will work to their advantage (65%), more so than it would in the western regions.”

Zuzanna Sojka (pictured), research manager at Campden Wealth, said it was important all families communicated their expectations clearly when finding out, or making sure, their funding partners share their same values.

“As it is the case with every relationship, trust and mutual understanding are built over time,” Sojka said.

“Participating family businesses who told us that they were satisfied with their current financing partners pointed to trust, transparency and regular communication as factors that make those relationships successful and long-lasting.”

Asked what lesson about values financiers should learn from Financing For Growth and apply when dealing with family businesses, Sojka said: “The research shows that families think long-term and look for like-minded partners who can embrace their values and are ready to work towards the same objectives.

“Therefore, capital providers should make effort to educate themselves about how the family businesses operate, their history, goals and values to ensure mutual understanding. They should also keep up to date on significant events and changes through regular communication.”

A total of 73 respondents from the Campden Wealth community of ultra-high net worth individuals in North America, Europe and Asia Pacific were surveyed from September to December, 2016. The average revenues of respondents was more than $400 million. A further five in-depth interviews were conducted with family members as well as family business and family office executives.

For more information about Family Business: Financing for Growth 2017 visit Campden Research here.

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