Family Offices: Unique Capital Allocation And Structuring Considerations
Updated: Aug 14, 2020
M&A transaction structures of a Family Office can, in many cases, be indistinguishable from their traditional private equity counterparts, with tax, legal and accounting considerations driving the majority of the structuring conversation. Unlike the traditional private equity fund, however, Family Offices have no accountability to outside investors looking for a return on capital over a defined time horizon and have the luxury of being able to invest patiently on behalf of family members and future generations who are less focused on an immediate return.
• Investing philosophies and concentration on certain asset classes based on a family’s business legacy and the background of a family office’s investment professionals.
• Strategic objectives determined among family members and any outside advisors tasked with responsibility for governance of the Family Office.
• The degree of tax sensitivity for the family office in the M&A context if an indefinite hold period is contemplated, short-term capital access needs are low, or a basis step-up might otherwise later be achieved.
•The degree of leverage desired to be obtained through third-party lender involvement, versus direct sourcing of leverage from capital within a Family Office.