Family business and private equity

PwC Study 2023: How effectively do private equity companies and family businesses work together?

Your experts for questions

Uwe Rittmann, Steve Roberts - PwC Deutschland

Uwe Rittmann
Head of Family Businesses and SMEs,
Member of the Board of Management at PwC Germany

Steve Roberts
PE Leader Germany & EMEA
Tel: +49 69 9585-1950

Private equity companies and family businesses: a great combination ... in theory

For many years, family businesses neither appreciated nor tolerated external investors; a sale or even a partial sale was simply unimaginable. However, the perception of private equity companies has shifted. Investors have proven themselves on the market as strategic partners who support the growth and development of companies with both capital and expertise.

The majority of family businesses today are open to external participation. At the same time, investors are very interested in investing in agile SMEs. In theory, this creates the conditions for fruitful partnerships.

However, these often fail due to a lack of trust and a digitalisation backlog in family businesses, as well as different ideas regarding the type of investment and the price – according to the results of the PwC study “Ziemlich beste Freunde? Sie arbeiten daran: Private Equity-Gesellschaften und Familienunternehmen”.

“The image of private equity companies has improved significantly, making them a viable business option in difficult times. Partnerships with private equity companies offer a great deal of experience, capital and expertise here.”

Uwe Rittmann,Head of Family Businesses and SMEs at PwC Germany

An overview of the study

The aim is to capitalise on each other’s strengths

For family businesses, selling a company is no longer something of a taboo: as numerous crises and challenges arise in sync, many family businesses are thinking about selling their company of a part thereof. This is attributable to a tense overall situation with key challenges such as digitalisation, climate change, geopolitical instability, the shortage of skilled workers and difficult financial conditions. Furthermore, many family businesses are burdened by unresolved succession issues.

Yes to private equity

Against this backdrop, it is not surprising that 90 per cent of the family businesses we surveyed could imagine welcoming private equity investment. In comparison, ten years ago, this degree of willingness stood at just 61 per cent, and in 2011, it was only 18 per cent.

Illustration PwC-study family businesses and private equity

Family businesses still primarily favour other family businesses as potential buyers, but private equity companies are already in second place.

These findings are also consistent with the results of a study conducted by Zeppelin University on behalf of the Family Business Foundation (“Stiftung Familienunternehmen”): According to the study, the younger generation of entrepreneurs, in particular, would not rule out selling the inherited family business – 23 per cent of the 400 NextGens surveyed even consider it likely.

When choosing an investor, monetary aspects alone are of secondary importance for entrepreneurs: It is more important for family businesses, whose DNA is geared towards the long term and cross-generational thinking, to find a partner who stands on an equal footing. The strategy, investment horizon and image of a potential partner are, therefore, the most important factors for them.

Illustration PwC-study family businesses and private equity


PwC survey: Private equity companies and family businesses

Vote in favour of investments in family businesses

On the other hand, private equity investors are highly interested in investing in family businesses, as the results of our survey show: 98 per cent of the companies we surveyed are planning to make an investment of this kind in the next few years. 

The investors primarily focus on agile family companies with high value creation potential, and aim to increase the company’s value over the holding period of the investment. In principle, investors are not interested in growth at any price. Instead, they use their expertise to improve the market position of family businesses or expand their market leadership – without losing sight of profitability, of course. They rarely play the role of “saviour in times of need”: Only a quarter of the companies surveyed would decide to restructure ailing family businesses.

Illustration PwC-study family businesses and private equity

You could enjoy the best of both worlds

In theory, the partners seem to have found each other, but practice can sometimes take a different trajectory: In fact, few transactions are realised in quantitative terms. One of the main reasons for this is the lack of trust in external investors – family businesses fear for their right to have a say. This is reflected in the disagreement over the form of shareholding: 54 per cent of the managers in family businesses we surveyed were in favour of a minority shareholding, which, in turn, contrasts with the aims of investors: 85 per cent of these aim for a majority shareholding, in order to be able to participate in all major company decisions.

The PE companies, on the other hand, criticise the digital backlogs that characterise family businesses and the corresponding lack of transparency in processes and procedures, as well as high resistance to change. Opinions also differ on price and profit and growth targets.

Illustration PwC-study family businesses and private equity

However, if the partners can overcome their discrepancies, real added value can be created. Both sides can benefit from each other: The family businesses in terms of capital procurement and productivity; the investors through value creation over a longer holding period than usual. 

Further study results at a glance

Image of PE investments

The fundamental scepticism emanating from family businesses towards financial investors has given way to a positive understanding of their performance: Companies with PE involvement are seen as more international, more competitive, more innovative and more productive than companies without a partner.

Reasons for a PE investment

92 per cent of family businesses hope that the entry of a financial investor will result in better capitalisation and support in the realisation of their growth targets, as well as operational improvements and efficiency increases. On balance, the majority of respondents are convinced that a PE investment can increase the overall performance of the family business.

Mutual appreciation

The appreciation is mutual: The majority of PE companies have been investing in family businesses and SMEs for years. Two-thirds of the PE companies surveyed provide equity capital to companies with an average turnover of less than EUR 100 million. The remainder is invested in larger companies with a turnover of EUR 100 to 500 million.

“It takes two to tango – both sides have to get involved with each other if they want to form a profitable partnership. This includes utilising each other’s strengths, in order to achieve a win-win situation.”

Steve Roberts,Head of Private Equity at PwC Germany


PwC Study „Private Equity und Familienunternehmen“

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The methodology

For our study, we surveyed 200 family businesses and 55 private equity companies, the latter in cooperation with the German Private Equity and Venture Capital Association (BVK).

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Uwe Rittmann

Uwe Rittmann

Leader Middle Market and Family Business, PwC Germany

Steve Roberts

Steve Roberts

Partner, PE Leader Germany & EMEA, PwC Germany

Tel: +49 69 9585-1950