Family Offices and business families embrace long-term investment strategies

Focusing on future prospects, family offices and corporations are exploring opportunities within emerging sectors including renewable energy, healthcare, and technology, with succession related transactions and M&A activity gaining prominence.

Renewable energy technology, energy storage and electric vehicles are going to be significant in their respective markets in the future and the race is on to develop and improve battery technology for transportation and energy storage. Family offices recognise this investment opportunity and are busy focusing on not only where the leaders are emerging, but also the resources behind the technology.

While such investments, such as in mining minerals like lithium - a key component for batteries - are unlikely to double or treble the money of family office investments in 3-5 years, we believe there will be good long term returns to made.

Family offices are also currently exploring opportunities for long term returns in healthcare, banking on meeting the increasing needs of an ageing population and enhanced obligations for key players in the sector around disability services. At the same time they are also starting to look at more direct investments, highlighted by Mike Cannon-Brookes’ Grok Ventures’ investment in AGL Energy or the extensive investment portfolio of Andrew Forrest’s Tattarang Group. The latter includes the iconic RM Williams brand and the Harvest Road pastoral empire, as well as aquaculture and dairy investments.

For private equity firms, deal volume down is down over past 12 months which means there is a growing need for investment managers to get capital out the door.  We expect that will result in a flurry of deal activity over the next 12 months. The focus of these firms will be on businesses with storing market positions, strong cashflow and growth opportunities.

We expect the target companies will more likely be in the healthcare, education and food sectors as opposed to the discretionary consumer space, which continues to be challenged by the soaring costs of living and high interest rates.

As the pace of technological change accelerates, companies are increasingly looking for ways to leverage data analytics and AI to gain insight into how they should position themselves strategically in their markets for the future. We believe this will continue to drive M&A activity as firms look at how to best utilise new technologies like generative AI to enhance business efficiency, especially by automating processes. 

This year we advised Sydney-based Microsoft specialist Data Addiction on its sale to the Liverpool Partners-backed emerging IT services and consulting firm Seisma Group, adding to its end-to-end capabilities.  The deal highlighted the efficiencies and costs savings to be achieved by acquiring a business that can bring data together from different systems, analyse it and generate insights to practically assist a management team.

Almost half of the merger and acquisition activity we are seeing by privately owned businesses has been triggered by succession planning issues.  Nothing translates better than cash, especially where business founder is getting to a point in their life where they do not see a natural progression into the next generation and want to crystallise some wealth.

We work closely with our colleagues at Lineage to assist with strategic advice and family succession plans where it is needed.

Moreover, the landscape of family business exits is evolving, as exemplified by the recent sale of the Sutton family's Woven Image business to building products giant CSR in September, a deal we recently advised on.  It will see the retirement of family patriarch Tony Sutton. Woven Image supplies builders with sustainable, design-led acoustic finishes and textiles. The two businesses have a long-standing relationship, with CSR being a trusted manufacturing partner to Woven Image for many years. 

This strategic move will see Woven Image become part of CSR's portfolio of brands within the construction sector, ending 36 years of ownership by the Sutton family. Such exits signify the changing dynamics within the realm of family businesses and their investments.

A leading boutique corporate advisory firm, Equion Capital provides a wide scope of advisory and transaction-related services across the full transaction spectrum.  Working with privately held or family-owned businesses to publicly listed corporations, Equion focuses on long term objectives whilst acting in the present, delivering commercial value and outstanding outcomes. To learn more, visit www.equion.com.au