Statistics maven Nate Silver, whose FiveThirtyEight blog accurately predicted the outcome of the 2012 presidental election, much to the dismay of certain partisan pundits, is predicting a Seattle Seahawks-New England Patriots matchup for Super Bowl XLVII in New Orleans on February 3. News outlets throughout the Seattle area jumped on the bandwagon Thursday, noting how Silver's accuracy in political prognostication is unparalleled. However, none seemed to mention that, earlier in the NFL season (and right after his election success), Silver was asked by RotoExperts, a Fantasy Football website, to predict the games of November 11/12. Silver got eight outcomes correct and six incorrect, including the Seahawks' victory over the New York Jets. Seems politics might be easier to predict than football.
The benefits for family businesses of having a direct relationship with their investors or buyers can be numerous. For example, if a family is looking to sell its business, family office buyers can provide liquidity and the opportunity for owners to exit without having to sell to a competitor. If a family is looking for additional financing to fund growth, direct family office investments can offer more favorable terms than other traditional sources of financing.
Importantly, wealthy families and individuals are more likely to take a long-term view of their investment and are not constrained by exit strategies devised to maximize value within a given time period. Further, these investors often made their money owning and operating successful companies and, as a result, are more likely to understand the nuances and unique challenges of family run businesses.
This investment trend, while also being experienced in other parts of the country, is gaining momentum in the Pacific Northwest. We are increasingly finding private direct investments to be an effective solution for our family-owned business clients and our family office clients.
Choosing the right investment partner is one of the most challenging decisions a family business can make. We have worked with many private, family run businesses to design long-term, flexible capital solutions and introduce our clients to suitable family office and private investors with common objectives.
For family offices, like any investment opportunity, buying into family businesses can be very attractive, but it is not without risk. Prior to investing, proper analysis calls for extensive financial due diligence to ensure interests and incentives are well aligned in the transaction. Success depends on ensuring both a structural and cultural fit. We actively encourage family business owners and family investors to work with experienced advisors to carefully explore every available option before determining the best course of action.
Christian Schiller is a managing director at Cascadia Capital, specializing in advising family businesses. Cascadia Capital is a Seattle-based investment bank serving middle market clients, globally.