Managed over generations and being carried forward as a lineage, family business have proved to be one of the most preferred investment options for funds. Amit Rathi of AnandRathi Brokeragesays that this is because of the fact that family-run businesses are robust and have endured ages of changing scenarios. They have been tried and tested over a period of time and have survived the changing business environment.
Another reason that persuades funds to invest in family-run businesses is that they are in established brick and mortar businesses where there is greater assurance of steady returns as compared with some of the new economy sectors.
While speaking at the Family Business Conclave organized by the Indian School of Business (ISB) in Mumbai, Amit Rathi, managing director of Anand Rathi Financial Services said that almost 90% of private equity investments made by his company would be in family-owned businesses.
Adi Godrej, chairman of Godrej group said that family-run businesses are more resilient than professional peers. They have lower cost structures and operate in stable industries, have lower attrition rates and pursue long-term strategies.
KKR India Advisors Pvt. Ltd (KKR), an arm of Kohlberg Kravis Roberts and Co. LP, has invested about Rs.17,000 crore so far to 55 companies including GMR Holdings Pvt. Ltd, Avantha Group and Apollo Hospitals Enterprise Ltd, which are all family-entrepreneurial ventures.
Roughly half of the funds that Apax Partners India has invested is in companies associated with large promoter families such as the Reddy family-led Apollo Group, the Murugappa Group, the Piramal Group and the RPG Group.
The ratio of family-led businesses that have attracted private equity is about 80–90%, said Nabankur Gupta, founder and CEO, Nobby Strategic Management and Family Business Consultants
The only problem with family owned business is when there ensues a dispute in the family, leading towards splitting of assets.