It’s time for family-owned firms to put private equity on the table

It’s time for family-owned firms to put private equity on the table -

Well-publicized cases of bad behavior have fueled certain biases against private equity. But family-owned businesses shouldn’t ignore the financial lifeline that PE can offer, Bob Goldsmith argues in a new op-ed in CFO Dive.

Family-owned businesses are experiencing a continuity crisis. These companies contribute more than half of the U.S. private sector’s gross domestic product, or $7.7 trillion, yet only 40% make it to a second generation of ownership, according to studies from the University of North Carolina at Charlotte and Cornell University, respectively.

For families that decide to sell their businesses, the notable bias against private equity firms, fueled by well-publicized cases of bad behavior, is unfortunate. In a recent New York Times article titled “Private Equity is Gutting America – and Getting Away With It,” federal prosecutor Brendan Ballou recently wrote of the damage  some PE acquisitions have caused in several industries, and Vox writer Emily Stewart similarly claimed that PE “kills everything you love” back in 2020 in response to the sector’s role in winding down Toys R US.

Owners assume that PE buyers only make predatory offers and present risks to the ongoing health of the companies they acquire and the communities in which they operate. Conversely, they presume that industry players will pay more and be easier to deal with.

However, by giving too much weight to these negative perspectives which tell only part of the story, owners may make counterproductive and costly decisions when it comes time to sell their businesses. Yes, private equity has its rotten apples, but there are good ones too, and owners can’t afford to discount the advantages these firms offer. There are several circumstances in which owners should be open-minded.

Read the full article on CFO Dive here:

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