• So-called "soft" and "hard" requirements are equally important for family businesses when selecting capital providers;
• Most family businesses still rely on traditional financing, but non-traditional methods are on the rise;
• Families are expecting restricted access to traditional finance in the future.
London / New York March 15th
Campden Wealth, in partnership with KKR, today released a new study, looking at the way family businesses finance their growth projects. The research titled, “Family Business: Financing for Growth 2017” summarises the experiences and views of family business executives towards a broad variety of traditional and non-traditional sources of capital. It identifies the financing methods that they currently use and those that they intend to employ in the future.
So-called "soft" and "hard" requirements are equally important for family businesses when selecting capital providers
The new research shows that family businesses weigh the available options against the so-called "hard" and "soft" requirements when looking for funding partners. For hard requirements, 88% regard the terms of funding to be highly important and 86% compare their options based on costs. With soft requirements, the most sought after are: a good understanding of the business (74%), added strategic benefit (70%), and the alignment of values and objectives (68%).
Dr. Rebecca Gooch, Director of Research at Campden Wealth, commented on the findings saying, “It is interesting to see how carefully family businesses assess capital providers against a broad variety of criteria. I was particularly struck by the importance of factors that go beyond the terms of contract, including the alignment of values and objectives as well as added strategic benefits such as skills or expertise. It is clear that families are seeking long-term partnerships that will support the future growth of their businesses.”
Non-traditional finance is on the rise
Family businesses are still reliant on traditional sources of finance as most obtain capital from local and regional corporate banks (85%), use retained earnings (78%) or rely on family members (64%). However, there is a strong indication that non-traditional sources of finance are increasingly considered an option for family businesses, particularly those in North America and Europe.
Globally, the use of non-traditional finance increased for one-third of family businesses over the past five years. As non-traditional sources of finance are still a novelty, families have mixed views about them. While many appreciate the flexibility of non-traditional providers (43%) and believe that they can offer more than just capital (40%), some feel that they can be more expensive (53%) and risky (42%). Nevertheless, the knowledge levels about non-traditional sources are low, with more than four in 10 family businesses admitting that they do not know enough about them.
Jim Burns, Member and Head of the Individual Investor Business at KKR, commented,"The results show that a relatively high number of participants do not feel they know enough about the non-traditional sources of capital available for family-owned businesses. To me, this suggests that there is a meaningful opportunity for both family businesses and alternative providers of capital, as the dialogue evolves and both sides find new ways to work together.”
Families expect restricted access to traditional finance in the future
Looking forward, many family businesses are not very optimistic regarding future access to finance; 63% pointed to the tighter regulation of banks as the main factor which will pose a challenge in the future. In addition, 60% also consider the current economic and capital markets climate to have a negative impact on access to finance.
Dr. Gooch said, “Family businesses are clearly concerned about their future access to finance, and many are looking to further explore non-traditional sources as options for their future financing in order to fund their growth strategies.”
Notes for editors:
About the research:
Data analysed in this report derives from a quantitative survey conducted from September to December 2016, with analysis and aggregation taking place from January to February 2017.
The sample of respondents was derived from Campden Wealth’s existing community of ultra-high net worth individuals in North America, Europe and Asia-Pacific. A total of 73 respondents participated in the quantitative survey, representing family businesses with average revenues exceeding USD $400 million.
To add context to the quantitative components of the study, five in-depth qualitative interviews were conducted with family members, as well as family business and family office executives.
Campden Wealth: Dr. Rebecca Gooch
+44 (0) 20 3763 2806
KKR: Kristi Huller or Cara Kleiman
About Campden Wealth
Campden Wealth is the leading independent provider of information, education and networking (in print, in person, online and via research) for generational family business owners and family offices globally.
Campden Research supplies market insight on key sector issues for its client community, and their advisors and suppliers. Through in-depth studies and comprehensive methodologies, Campden Research provides unique and proprietary data and analysis based on primary sources.
Campden Wealth also publishes the leading international business title CampdenFB, aimed at members of family-owned companies in at least their second generation. Campden Wealth further enhanced its international reach and community with the acquisition of the Institute for Private Investors (IPI), the leading membership network of private investors in the United States, founded in 1991 and with the establishment of Campden Family Connect PVT Ltd a joint venture with the Patni Family in Mumbai, India in 2015.
KKR is a leading global investment firm that manages investments across multiple asset classes, including private equity, energy, infrastructure, real estate, credit and hedge funds. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation at the asset level. KKR invests its own capital alongside its partners’ capital and brings opportunities to others through its capital markets business. References to KKR’s investments may include the activities of its sponsored funds. For additional information about KKR & Co. L.P. (NYSE:KKR), please visit KKR’s website at www.kkr.com and on Twitter @KKR_Co.