06.02.2012

Family businesses and money from private equity firms

The Witten Institute for Family Business (WIFU) has published a handbook on employment of external capital.

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A practical guide on family business and private equity ("Familienunternehmen und Private Equity") was published by the Witten Institute for Family Business (WIFU) in cooperation with the DZ Equity Partner GmbH. This handbook illustrates ways to get fresh capital with new partners as a viable alternative to classical methods of leverage financing through banks or IPO. Private equity is an alternative for family businesses that ensures considerably more scope of action. According to Dr. Tom Rüsen, managing director of WIFU, the majority of private equity firms still has no proper understanding of family businesses. "Prior to a contract, it is advisable to get to know the new partner well, to thoroughly examine his objectives and expectations and align them with one's own agenda," says Olivier Weddrien, director of DZ Equity Partner GmbH. "And the chemistry must be right. This can play a key role in the success or failure of the joint project."

The handbook illustrates conditions where private equity funding makes sense, and also the criteria for selecting a suitable partner. Before a contract is signed, both sides must agree on the business developments and results they strive to achieve. The family firm should seek answers to questions that facilitate the choice of a suitable partner and future collaboration, such as: does this private equity firm offer sufficient scope of action and autonomy, or: is this investor consistent with our corporate culture. All important aspects must be included in a shareholder agreement from the onset of a prospective partnership up to defined exit scenarios, if private equity is to be employed as an active and intelligent asset.

For a download of the handbook see www.wifu.de.