Family finance

This article is an extract from the European M&A Outlook 2025. For the full report, please fill in the form here.

Family offices have come a long way. They were traditionally passive investors in equities and real estate, and sometimes limited partners in PE funds. But the sector has grown enormously, and the ambitions and activities of family offices are now more diverse than ever before.

Most family offices keep a low profile, making data difficult to gather. Estimates for the size of the sector range from around 7,000 offices to over 20,000, with a global value of anything from USD 6tn to USD 10tn.

Some things, however, are clear. The number of family offices has more than doubled since the millennium. The largest manage portfolios worth many billions of dollars. And while the majority still represent single families, the sector now includes many multi-family offices, some even owned and run by third parties.

Milena Grayde, JP Morgan’s Global co-Head of Family Investment Firms, says, “Watching family offices evolve has been really exciting. They are much more active as direct investors then they used to be. And as direct investments come in various shapes and sizes, that leads to more activity and diversity.”

CMS Partner Hilke Herchen agrees. “Not only are they now more sophisticated, often with greater access to their own research and analysis, but they are more inclined to leverage the industry expertise of the family and – sometimes as the baton is passed to the next generation – to be more involved in investment choices.”

Taking the long view

There is a lot of variety among family offices. As Grayde explains, “Evolving in their mandates they take different journeys. They may resemble anything from a very traditional family-owned investment firm to a private entity that attracts third party capital or is even publicly listed.”

But despite that variety, family offices tend to have certain characteristics. They often have lean decision-making structures. They are typically long-view investors, with large amounts of patient capital. However, many also want to take an active role in the businesses where they invest. They may be patient investors, but they are increasingly unlikely to be passive ones.

Although some family offices have always had a strong risk appetite, many have historically been conservative about where they invest, preferring the core of their portfolios to be lower-risk – frequently more cash-generative – investments. There have been indications that more are inclined to adopt growth strategies. But the market downturn saw a general reversion to a balanced approach.

Chemistry lessons

Is there any truth in the idea that family offices prefer to invest in other businesses that are family-run? There are certainly cases where founders who want to sell up or seek co-investment will opt to do a deal with a family office because of a shared perspective.

Says Grayde, “The chemistry factor can be a big plus. Sometimes it’s not there, but whenever it’s there, it’s there in a big way.” In this respect, Hilke Herchen comments, “If the investment is very close to the own business of the family, investors need to bear in mind competition law and issues such as the exchange of information through clean teams. The next generation may wish to pursue their own business ideas, based on their own values and ambition, via direct investments, and often with future facing and sustainable goals.”

There are also deals that see family offices co-invest. As Grayde observes: “Many of them already know each other, often through work.” They often think the same way and have similar goals.

More broadly, data shows that while ten years ago only about 20% of family office direct investments and M&A were club deals, today the number is more like 60%. This is a major change, and while it possibly reflects the large number of newer family offices – many of which may lack the heft to be sole investors – it also represents a major evolution in attitude. Family offices are now much more likely to join forces with PE firms or other investors in order to spread their risk.

Family offices sometimes also engage in M&A through or with their portfolio businesses. For example, the Saadé family office, Merit France, is the majority owner of shipping giant CMA CGM. In July, Merit acquired 20% of Altice Media, the third-largest private media group in France, with CMA CGM buying the other 80%.

An evolving deal landscape Levels of family office M&A have dipped significantly from their 2021 heights. If anything, family offices may have reacted more strongly to the investment downturn than other investors. Analysis from PwC suggests that, globally, the family office market share of direct investments/M&A by value fell from 6% in 2H21 to 3% in 1H23.

But there is also evidence that many have been seeking out new opportunities – doing a greater proportion of small deals, for example, with an increasing emphasis on areas like tech and AI. According to Grayde, healthcare, business services and industrial technology are ‘hot’ areas too.

It is also clear that many are looking for more opportunities in infrastructure investment, e.g. in the (renewable) energy sector. To Hilke Herchen at CMS this is no surprise. “The long-term investment horizons involved make infrastructure a perfect fit for many family offices, just as real estate has traditionally been. ‘Green tech’ investments are also attractive in this sector. The sector’s role in net zero transition makes it very appealing for the growing number with ESG concerns.”