How billionaire families structure direct deals
Built on Chapter 11 of The Single Family Office by Richard C. Wilson. Full chapter text: FamilyOffices.com.
When people picture a family office deal, they usually picture buying a company outright. In practice, the structures are much more varied. Here are the main ones I covered in the book and why families choose each.
Minority vs majority
When asked, many families say they would rather take minority stakes. In my experience, that preference does not hold up well. Families doing a lot of direct deals often end up taking majority positions. They need the control to protect their money and add real value.
Debt
Some private companies come to family offices because banks will not lend to them, or only on bad terms. A family can charge a high rate on better terms than a bank would offer.
Debt pays interest right away, so you do not wait for a sale. It also sits ahead of equity if the company fails. Some families over-collateralize. For example, they lend against property in another country that a local bank will not accept, and hold far more collateral than the loan. The trade-off is limited upside.
Convertible debt
A convertible loan pays income and can turn into equity later, often at a new funding round, a revenue target, an IPO, or a sale. It limits upside compared with straight equity, and it can mean less control.
Royalties
Royalties are common with small manufacturers. The investor gets paid back with every unit sold. A small royalty per unit can justify a smaller equity stake, which helps the owner keep more of the company. It can help when a deal is a bit early or risky, because money starts coming back on day one.
Mezzanine and lending
A small number of families act almost like a bank. They lend to developers and businesses at strong rates, especially when banks pull back. A few make it a core strategy with dedicated staff.
Platforms
Active families often buy several businesses in one industry and run them as a platform. They share customers and overhead. Each new deal is picked to help the companies they already own.
Exiting well
When it is time to sell, the best price often comes from showing a strategic buyer the strategic value of the asset beyond its revenue, and from having more than one interested buyer. Skilled structuring helps too. I once sat in a long meeting where a family could not meet a seller's price multiple. The deal moved forward once we showed how the structure, tax planning, and incentives would work.
Choosing a structure in practice
A quick way to choose is to start with what the family needs from the deal. If the family wants steady cash flow, debt or a royalty usually fits. If it wants a large upside and believes in the founder, equity is the better fit. If it wants to run the business or merge it with others, it needs a majority stake.
Many good deals mix these. A family might lend part of the money, take a smaller equity stake, and add a modest royalty that stops once principal is repaid. That mix can bridge a gap on price, since the owner gives up less equity and the family starts getting paid back early.
Every mix brings tax and legal questions, so bring in an experienced attorney before the term sheet is final.
What to take from this
- Match the structure to what you want most: income, upside, or control.
- Expect to need a majority stake more often than you plan.
- Consider royalties for early or small manufacturing deals.
- Build platforms in your core industry, one aligned acquisition at a time.
This page is general information, not legal, tax, or investment advice. Speak with a qualified attorney and advisor about any deal structure.
Questions and answers
Do family offices prefer minority or majority stakes? Many say minority, but active direct investors often end up with majority stakes for control.
Why lend instead of buying equity? Debt pays income right away and ranks ahead of equity, though upside is limited.
What is a royalty deal? The investor is paid a set amount per sale, often alongside a smaller equity stake.
What is a platform strategy? Buying several aligned companies in one industry and sharing costs and customers.