The panel brought together representatives of family offices and family-backed investment vehicles from the United States and Europe; the discussion focused primarily on the challenges of cross-border direct investing. Each of the panellists noted the dramatic increase over the past few years of direct investing transactions, as well as the increased participation of family offices and family-backed investment vehicles in auctions and other competitive processes. The consensus was that this trend will continue and, in all likelihood, accelerate in the coming years.
The panel was asked the following question: When you look at a cross-border investment opportunity, what strategies do you employ that might be different than in a domestic deal, for instance, around due diligence, local partners and other advisors, and ongoing management and oversight? Dan Gay of Kensington Capital stated that finding a trusted local partner was the key to a successful cross-border investment; the other panellists agreed that they would not undertake a significant cross-border investment without a local partner who would play an active role in the oversight of the investment.
Several of the panellists indicated a preference for gaining cross-border exposure through the activities of their portfolio companies, that is to say, investing in a domestic company with international operations, which itself may engage in cross-border M&A activity. Paul Carbone of Pritzker Private Capital shared that he would rarely expect to know more about a cross-border opportunity than a local investor, but that his portfolio company management would be in a better position to evaluate cross-border opportunities in their industries.
Regarding trends for 2018, the panellists all commented that valuations were high, and that this could have an effect on transactional activity. On the other hand, it was noted by both Michael Riemenschneider of Reimann Investors and Philipp Haindl of the Serafin Group that there is a tremendous amount of capital looking to be deployed, and that if political uncertainties settled a bit, a further uptick in direct investing activity during 2018 could be expected.
Finally, the panel discussed the increasing role of independent sponsors and other intermediaries in the direct investing market. Both Anton Sternberg of Stonehage Fleming and Rupert Weber of McDermott noted that, given the challenges often faced by family offices in connection with sourcing quality deals, the role of such intermediaries would likely increase, at least in the short term.
The panel closed with a discussion of “socially responsible” or “impact” investing; the consensus was that this investment model was in its early stages, but would assume a more prominent role in the direct investing world as a younger generation begins to assert itself within family offices.
