PwC’s recently released U.S.-focused look at family office deals finds an increased focus on tech startups, emerging technology, media and telecommunications — and a shift, though likely temporary, away from real estate.
The report, Power to adapt: How US family offices can thrive in the M&A market, is a follow-up to PwC’s Global Family Office Deals Study 2023. Danielle Valkner, family office leader for PwC US, discusses its key themes and recommendations:
Overall trends
Family office investors are a major force in this market. They’ve been very resilient — a provider of patient capital. They’re constantly looking for new opportunities. And when the market is slowing down a little bit, they’re becoming even more of a force.
With the slowdown in the M&A and deals market right now, family offices are looking to diversify more, so they’re doing smaller deals and also more club deals, where they may take a smaller stake and join with other partners to help manage the exposure and the risks. That is definitely a developing trend.
On the shift toward tech investments
In particular for the U.S., the focus is on investing in tech startups, emerging technology, media and telecommunications and biotech. There is a global shift away from real estate and shifting investment dollars toward these other sectors.
However, we really think that the shift away from real estate is temporary. For a long time, real estate has been a good diversification and hedge for family offices in a significant portion of their investment portfolio. So we think it’s taking kind of a temporary decline. We believe that certain subsectors in within the real estate market — such as wellness, digital infrastructure, e-commerce, affordable housing — are showing continued favor and growth opportunities. And so we do expect for that to turn around.
We are definitely in a state of continuous transformation. Disruption has become the new norm, and technology is a major driver of that. So there’s a lot to think about when making new investments, whether you’re investing directly in technology or in a company that needs to have a technology strategy. Those skill sets and areas of focus are something that investors really need to have continued focus on.
Focus on good governance and due diligence
There’s also a trend of investing globally, and investing globally introduces a whole new realm of considerations as it relates to regulatory requirements. Making sure that there are good governance practices and communications around all the stakeholders —the family members, the investment team, due diligence team and your companies that you’re investing in, as well as any partners that you have partnered with as part of that investment — just becomes more and more critical.
It’s so critical to make sure that you’re doing good due diligence on these investments, even though they’re taking smaller deals and maybe joining with a larger group of investors. You still need to do your own due diligence, and especially in today’s regulatory environment, as well as with the disruption that’s happening, that due diligence is becoming more and more critical. So family offices are really investing in those skill sets and capabilities.
