“With a family office, the timing [on getting a return on the investment] is more flexible than it is for a PE firm. We’re a lot more patient, and our capital is a little friendlier, meaning we’re more forgiving if there is a hiccup in the business. We look at it as a family of companies or partners, not just a fund of investments.” – James Carey
James Carey is a Partner at Next Sparc Growth Partners. This professional family office makes direct investments in rapidly growing founder-led and family-owned businesses, leading the Business Development efforts at the firm. Before joining Next Sparc, James was a Vice President and the Head of Business Development at Peterson Partners, a diversified private investment firm focused on growth equity and venture capital investments. Prior to joining Peterson Partners, James was a Director at H.I.G. Capital, a leading global private equity investment firm with over $50 billion of equity capital under management, where he sat across the entire family of funds. Earlier in his career, James was an Associate at New River Capital Partners, an affiliate of Huizenga Holdings, where he was responsible for Corporate Development. James received a Bachelor of Science in Business Administration from the University of Vermont in Burlington.
- What is the biggest difference between a private equity firm and a family office? [2:13]
- What is a family office, in the simplest terms? [7:30]
- How wealthy does someone typically need to be to form a single-family office? [9:42]
- What is the definition of a direct investment? [13:28]
- Why is it important for owners to consider the investment time frame for a potential investor and whether or not the investor has expertise in a particular industry? [17:10]
- What does a family office look for in a company they are considering investing in? How does a family office interact with the owner and the company going forward? How does this differ from the approach of a PE firm? [23:50]
- Why is a business owner’s personality an important consideration when a family office is looking at making an investment in their business? [26:47]
- What does a family office provide an owner beyond the monetary value of their investment? [31:50]
- Are family offices more hands-on with companies they invest in than private equity firms? [33:30]
- Are there major differences in how deals are structured with PE firms vs. family offices? [40:27]
- What’s the difference between a minority and majority investment, and how much control should an owner expect to relinquish when they take on an investor? [43:43]
- How can entrepreneurs decide between selling to a PE firm vs. a family office? [51:02]
- What are independent sponsors? [52:59]
- How can business owners find details on a family office to find the right one to work with? [59:08]
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Acronyms or Terms Used in This Episode
- PE Firms: private equity firms – Organizations that invest in private companies or that take public companies private, often with the goal of improving performance and selling later for a profit.
- VC Firms: venture capital firms – These are entities that provide financial support to startups and small companies with high growth potential in exchange for equity or ownership.
- LPs: limited partners – These are investors who contribute capital to a PE firm that is raising funds for acquisitions.
- EBIT: earnings before interest and taxes – A measure of a company’s operating profitability, calculated as revenue minus operating expenses.
- EBITDA: A measurement of the cash flow of a company, which includes earnings before interest, taxes, depreciation, and amortization.
- Majority Investment: An investment where the investor acquires more than 50% ownership stake in a company, giving them control over decision-making.
- Minority Investment: An investment where the investor acquires less than 50% ownership stake in a company, allowing them to have a stake in the business without controlling interest.
- LTIP: long-term investment plan – An equity sharing plan for the CEO, owner, or founder, and key employees that acts as an incentive plan for them to get more equity in the business over time.
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