Where Family Offices Win In Direct Acquisitions Of Private U.S. “middle-market” Companies

Family offices are increasingly turning to direct investment in private companies, but competing with established private equity firms presents its own challenges. Andrew M. Apfelberg and Stefanie J. Lipson of Greenberg Glusker explore where family offices can gain an edge in U.S. middle-market acquisitions, from patient capital and flexible deal structures to long-term ownership and succession planning.

On paper, a private equity (PE) fund can look impossible to beat in the competition to buy a privately held middle-market company.

The well-conditioned, well-funded machine of private equity funds comes prepared with a full complement of investment bankers, a fully staffed team of deal counsel, valuation, and diligence professionals, and increasingly sophisticated artificial intelligence tools to optimise the process, all deployed in force to get the deal closed, and usually on their terms.

And private equity is seemingly ubiquitous, in every industry (even professional services). For private single- and multi-family offices looking to invest directly or partner strategically in the private market, it can seem as though they are David, hoping to defeat Goliath PE.

Despite the uneven matchup, family offices can succeed in these contests more often than might be expected by using to their advantage the very qualities that make them distinct from private equity. 

While we have traditionally seen mostly U.S.-based family offices involved in U.S. middle-market direct acquisitions, British family offices are among the most active direct investors anywhere, and more of them are now looking across the Atlantic to buy private companies in the U.S., arguably the largest and deepest middle market in the world. 

Because what distinguishes a family office buyer from a private equity buyer is inherent in the family office model rather than in any particular country’s version of it, this article explores the common themes in a U.S. middle-market deal process where family offices find success with the seller, even against a private equity firm, and what a cross-border dimension adds.

One idea runs underneath all of it. Technology is moving faster, legal and tax regimes keep shifting, families are more mobile across borders, and priorities change with each generation. In that environment, optionality — the ability to keep choices open, has become a valued objective and a strategic advantage in its own right.

The road that brought us here

As advisors to both family offices and the middle-market companies they pursue, we have observed a noticeable shift over the past several years, as family offices increasingly seek to acquire interests in these companies directly, rather than indirectly through investment in PE and venture capital (VC) funds.

Surveys and academic research support this: most family offices are interested in and are making direct investments in private companies, and for many of them it has become central to how they put their capital to work. While a direct investment means taking on more risk as compared with writing a check to a PE fund, in exchange the family office gains more control, the potential for better returns, and lower fees.

This hasn’t always been the story. Not long ago, in our experience, bankers and other M&A professionals often left family offices off the list of potential buyers when they took a client to market.

Family offices were seen as unproven, as unlikely to pay a full valuation, or as unable to stay competitive in an auction against PE and VC funds. Sellers and the deal community care enormously about certainty of closing and, on that scorecard, a family office looked like a risk as compared to the well-engineered machine of PE and VC.

So the door that opened most easily was the indirect one: capital allocations to PE and VC funds, where a family office’s capital was welcome even when the family office itself was not at the table.

For some family offices, this wasn’t enough. They responded by joining forces, sometimes informally and sometimes through more formal arrangements, coming together on deals and the capital to fund them competitively in the marketplace. While arguably more productive than chasing the deal alone, it still did not produce many wins. 

So family offices adapted and evolved. They built out more formal infrastructure, professionalized how the family’s capital is managed and deployed, and brought in former bankers and PE professionals to help operate it.

Those hires came with strategic relationships within the M&A community and among the referral sources that drive deal flow. As family offices started seeing more opportunities, they could become more selective, lean into their strengths, and get picked as the buyer in direct deals.

A view from inside the sale process

A typical sale process runs in stages. An investment banker or other trusted advisor, often an attorney, accountant, or financial advisor, starts by building a list of parties who might want to buy the company. After some initial outreach and a look at high-level financials, that list narrows to an active group.

Each participant submits an indication of interest with a valuation range and the assumptions behind it. A handful move on to a second round: deeper diligence, meetings with the sellers, and formal letters of intent. In the end, those letters get measured against a list of criteria, most of them negotiated, and a buyer is chosen. 

The criteria usually include:

• Structure: The transaction structure and its consequences for taxation, regulatory approvals, and third-party consents.
• Price: The form of consideration (for example, cash, stock, or a promissory note), the timing of payment (at closing or afterwards), and any conditions on that payment (such as an earnout tied to financial results or operating metrics).
• Indemnity terms: The length of time the representations and warranties survive, the form and size of the indemnity “basket,” the level of the “cap,” and whether representation and warranty insurance will cover some or all of that exposure in lieu of a holdback or a purchase-price escrow.
• Employment: The terms of employment agreements and noncompete covenants.
• Closing conditions: The conditions to closing, the most significant of which is whether the transaction includes a financing contingency.
• Cultural fit: The seller’s fit with the acquiring organization.
• Strategic opportunity: The strategic opportunity within the broader industry.
• Likeability: Personal “likeability” between buyer and seller.

Each seller prioritises these differently, and those priorities are often shaped by their own relationship to the company being sold — is this a generational family business, a relatively new venture, or a strategic growth partnership, to name a few. Some will want the highest number.

Others will care most about how long a noncompete keeps them sidelined. In our experience, valuation and the risk and indemnity terms are almost always high-priority factors, with cultural fit, strategic opportunity, and likeability close behind. Where a family office is competitive on price, the second group of factors can be distinguishing characteristics.

Where family offices win

Family offices are often uniquely positioned to design and preserve that optionality, because they can approach an acquisition through a broader lens than most institutional investors can.

The flexibility is not confined to the negotiation. It extends to how the business is owned, how the family plans around it, and how readily both can adapt as opportunities, family priorities, and the legal landscape change.

When a seller takes some equity in the deal, or rolls a piece of the company forward, there is another goal on the horizon: the day that equity finally sells.

When the focus is not just on the now but also on the later, the question is which buyer gives the company, and its stakeholders, the best opportunity for growth and for commanding a higher price next time around.

That “second bite at the apple” comes down to who is stewarding the company in the interim, and how much time they have to run their plan.

A family office’s founders and senior people with prior experience, whether from their own business or other strategic acquisitions, can bring real industry knowledge and relationships to the table, the kind that can move a company’s performance quickly.

The company’s vendors, suppliers, distributors, and customers may already know the family’s principals and how the family operates its businesses. Some families have built and sold businesses in the same space before, and a proven approach is one a seller can believe in. A PE fund might own other companies in the sector, but it is unusual for funds to have operators of their own. 

Time is another strategic advantage. A PE or VC fund has to exit within a set window (and often sooner, if it wants to raise its next fund), while a family office can take the long view. Because nothing forces a family office to sell by a certain date, it also does not need the usual contractual levers, such as the rights that make a founder buy back equity or sell the whole company after a few years.

That keeps everyone pulling in the same direction and takes the pressure off selling at the wrong moment. For a seller evaluating different potential buyers, more time can mean more confidence that the plan will hold.

A seller will also want to know how the money gets divided on the next sale. This is where family offices have more deal-structure flexibility than a PE or VC fund. With no limited partners to answer to, they are not chasing a required return, so they can sit in common equity instead of preferred.

That matters to a seller, because being on the same equity as the buyer means greater participation in the eventual proceeds. Preferred equity works differently: it usually earns an annual preferred return (say 8% of committed capital, or a payment-in-kind), and on a sale the fund takes back all of its capital plus any unpaid preferred before common sees a dollar.

A family office that does take preferred can live with a below-market rate, under 8%, and rarely bothers with payment-in-kind; if it takes common, there is no preferred return at all, and the founder participates pro rata, right alongside the family office.

Family offices also tend to skip the management fee that PE funds routinely charge the company, which leaves more cash in the business and more profit for everyone. Add it all up, and the seller can walk away with meaningfully more.

Family offices also lean on debt less than funds do, which often means greater certainty of closing. A PE fund may prefer borrowed capital to fund acquisitions, because debt is cheaper than the return it promised its investors.

A family office does not have those outside investors watching performance; it answers to family members, whose priorities are not identical. Returns matter, of course. But so do several other factors, including family governance, tax planning, cash flow, long-term strategy and succession, generational wealth, and philanthropy.

That gives a family office more flexibility to define “value” on its own terms. It can grow through singles and doubles instead of always trying to clear the fences, which opens up a far wider set of deals and gives a seller looking for a real partner a different kind of buyer to engage with.

Likeability and cultural fit are two factors where a family office can see its competitive edge shine, and that edge usually comes down to a shared background. Buyers and sellers often know the same people, have worked on the same trade shows, and used the same suppliers.

That builds quick credibility and easy rapport. Some sellers would simply rather take personal capital, with a name and a face behind it, than institutional capital that answers to a process. Family offices can also be better attuned to a seller’s estate-planning goals and to the things that never show up on a term sheet, like reputation in the industry, legacy, and the “What’s Next” part of the story.

Because the principals and operators of a family office have sat in the seller’s chair and routinely navigate the intersection of private wealth, family relationships, and business enterprise, they can offer a seller something a PE fund and its banker cannot – a shared experience.  

Planning across generations and jurisdictions 

The most sophisticated family offices are putting these very qualities to work, attracting the right targets and referral sources, and the results show up not only in stronger, more profitable companies held for the long term, but also in something harder to measure: the opportunities for the family itself.

Succession planning and wealth transition are top priorities (and concerns) for many families, even as private markets remain their single largest holding, and both of those truths make early, intentional planning matter more.

Advisors devote a great deal of attention to what is often called “pre-liquidity transaction planning” for founders, principals, family offices, and other owners of closely held businesses, though thoughtful practitioners disagree about how far ahead of a liquidity event that planning should be implemented.

The structures most frequently used in U.S. planning include a mix of irrevocable trusts and charitable vehicles, designed to serve at least a portion of the selling party’s objectives for tax-efficient transfers and income-tax planning.

The same principles, though, apply just as squarely to pre-acquisition planning by the acquiring family office, undertaken in anticipation of the target’s growth and, in time, its sale. 

When focusing on pre-sale or pre-acquisition planning, families can plan on their own timeline, and that, in our experience, is precisely when the best structures come together.

The most successful of these structures are put in place well before any company is in view, at a moment chosen for the family’s reasons rather than driven by an impending deal deadline. Planners often stress keeping the wealth-transfer structure at arm’s length from a liquidity event, because of valuation considerations and deal complications.

The goal is to move an interest at a lower value, outright or with discounts for lack of control or lack of marketability, and the closer one comes to a liquidity event, once the market has set fair market value between a willing buyer and a willing seller, the more difficult it becomes to defend a different value in an appraisal of what was transferred within the family. 

Beyond the valuation piece, doing wealth-transfer planning in the middle of a live deal runs into some very practical problems. First, the seller gets pulled in different directions.

Closing becomes the mission, and anything that slows the process down or adds complexity may not align with the priorities and interests of others trying to close the deal. Second, a seller already has a lot on their mind, and asking them to take on what is really a separate, complicated transaction within the family, at the pace a deal demands, is often too much.

For reasons both tax and personal, the most elegant wealth-transfer solutions are usually built long beforehand, when an asset has a lower or minimal value, so that the exit becomes the natural culmination of that work, much as the sale itself is the culmination of the years spent building the company into something worth buying.

Family offices and the families selling private companies often share more than either side may realise. Both understand, almost instinctively, what thoughtful succession planning can do: capture the value a liquidity event or strategic acquisition creates, grow what is acquired, and open a wider set of succession possibilities along the way.

That common ground works in everyone’s favour, giving the seller room to plan before and after the sale, and letting the family office acquire in a flexible way that aligns with its own governance and succession goals. 

The estate-planning principles here are the familiar ones. A family office can move assets to a younger generation at a lower value, or bring in a new venture as a co-investment or entirely at the younger generation’s level, so that the growth happens outside the senior generation’s estate.

When the acquisition entity is formed, family members, or the trusts and vehicles created for them, can be brought in from the start. That can be funded with capital already sitting in existing irrevocable trusts, or through new trusts and entities built for the purpose; either way, a family should think carefully about the entity’s other capital needs and make sure the trusts or family entities have the resources, or the access to financing, to meet them.

There is room, too, to shape how the new investment is governed, through non-voting equity or a management entity that keeps control with the founder or another trusted family member or committee. In the end, the family designs something built around itself, rather than settling for a limited-partner seat in someone else’s fund. 

As with any cross-border situation or transaction, there are added considerations for a family office coming from outside the U.S., such as a UK family office active in the same U.S. market.

As just one example, while the UK succession regime and inheritance tax may impose rates as onerous as those in the U.S., the exemption (nil rate band) is substantially lower than the current U.S. exclusion of $15 million USD.

Investing in U.S. companies without proper planning can create a number of added complexities: a buyer who is neither a U.S. citizen nor U.S.-domiciled is exposed to U.S. estate tax at 40% on U.S.-situs assets — directly held shares in a U.S. corporation among them, with an exclusion against the U.S. estate tax of only $60,000.

The U.S.–UK estate and gift tax treaty can be a helpful tool in mitigating double taxation, but only where the exposure is understood, the structuring planned, and the position is claimed. Numerous other cross-border planning complexities exist, including alignment of income tax considerations, matching of entity structures, and understanding of each jurisdiction’s treatment and taxation of trust arrangements.

Proper legal and tax counsel from each jurisdiction is essential throughout the planning and implementation process, as well as in the continued reporting and compliance following the transaction. The lesson, either way, is the one that runs throughout: structure the acquisition vehicle thoughtfully, and do it well before a target is in view.

Where the story goes from here 

PE and VC funds are not going anywhere; they remain the biggest players in the market, and most often the first buyer a seller thinks of. In 2025, global private equity deal value rose about 19%, to roughly $2.6 trillion, the second-highest total on record, while exit value jumped 41% as the IPO market reopened.

But look closer, and the picture is more nuanced. The number of deals and exits in fact, fell; the gains came from fewer, larger transactions. There is also a mountain of committed but uninvested capital, or “dry powder,” still on the books, much of it ageing.

And here is the opening for family offices: funds are holding their companies longer than they ever have. The average hold has reached a record 6.6 years, and a record 16,000 companies, roughly half of everything buyout funds own, have now been sitting for more than four years, still waiting to be sold.

Other major studies land in the same place: a narrow recovery carried by the biggest deals, while the cash returned to fund investors stays near record lows. That is a lot of room for family offices to operate, especially in the middle market, generally, deals under $250 million USD. 

Meanwhile, the family office world has grown dramatically. Deloitte’s Family Office Insights counts about 8,030 single-family offices across the globe in 2024, a jump from 6,130 five years earlier, and expects the total to pass 10,720 by 2030, roughly a 75% increase over 2019.

North America was home to around 3,180 of them in 2024 and is set to grow the fastest, with its count nearly doubling from 2,210 in 2019 to 4,190 in 2030, a 90% rise.

The wealth behind these offices is climbing at a similar pace: an estimated $5.5 trillion in 2024, against $3.3 trillion in 2019, on its way to a projected $9.5 trillion by 2030, while assets under management are expected to climb from about $3.1 trillion to $5.4 trillion over the same stretch.

The pattern is not confined to the U.S. The UK is the second-largest market in the world for family office start-up investment, behind only the U.S., and family offices now account for roughly three-quarters of all investment into UK start-ups, about 74% in 2023.

The same shift toward hands-on ownership runs through the surveys: most family offices report making direct investments in private companies, and UK club deals have nearly doubled over the past nine years as families reach for the scale that larger private equity and M&A transactions demand.

So where does this leave us? We think family offices will keep finding more room to operate in the middle market, even as the family office industry itself continues to shift.

If family offices continue to focus on their strengths and the factors that distinguish them from PE buyers, they can win a bigger share of the deals that come up.

Realising that optionality takes intentional planning and early collaboration among corporate, private client, tax, and other advisors, so that the decisions made today preserve meaningful choices tomorrow.

Planning with a lens to adaptability matters as much as planning for growth and efficiency. And when the two sides are genuinely aligned, everyone benefits: the families behind the offices and the owners and employees of the companies they acquire.

Originally published by Wealth DFM Magazine