Family Offices on Axial – Our Member’s View on the Market

Family offices are becoming a critical player in the US middle market. They are more sophisticated and active than ever. We recently spoke to several family offices to learn about their views on the market.

In this first article of the family office series, we spoke to Sami Elbadramany, a partner at Legacy Ventures.

Axial: Tell us about your business

Legacy Ventures: Legacy Ventures is a family office that provides private equity to enable growth acceleration for founder- and family-owned businesses.  The firm focuses on a broad range of sectors, including business services, consumer, industrials, healthcare services, and technology.  Our partners are based in Charlotte, Boca Raton and Atlanta, effectively covering the Southeast.  Legacy Ventures was formalized in early 2017 with the partners, all of which are family members, having completed multiple investments together outside the formal family office.  We currently have 4 active investments with the goal of completing 2 to 4 additional platform acquisitions over the next twelve months.

We look for companies headquartered in the Southeast with $1 to $7 million of EBITDA, with our sweet spot being $2 to $5 million.  Our primary focus, other than size and geography, is the people we are partnering with.  As a family office, we relate very well with entrepreneurs where their legacy is important, and trust and transparency are essential.  We care deeply about who our partners are, and it’s vital that we all enjoy working together.   

Axial: What are the trends in investing you see from family offices?

Legacy: Family offices have varied investment approaches, but we are seeing direct investing becoming more prevalent. One challenge is that it takes a lot of resources to do direct investing. Depending on how many transactions a family office is looking to do, and the deal size, it’s not always efficient to go direct. For example, if a family office is doing one small deal a year, then it may not be useful for that firm to go direct. Partnering with an independent sponsor or another family office may work best. If the family office is doing larger transactions or the investment team is focused on multiple asset classes, then they can set up the infrastructure to go direct quite efficiently. We see many family offices testing out different business models to figure out what works best for them, as it isn’t a one size fits all.

Axial: If you were to use three words to describe 2017, what would they be and what are the stories behind them?

Legacy: Exciting. We’ve formalized our family office this year, and there is a lot of activity in the range of the businesses we are looking at. It’s been a busy year, and we are pursuing several excellent opportunities. High-growth.  Our portfolio companies have performed exceptionally well in 2017, with strong economic tailwinds and critical initiatives that have taken hold.  Relationship-focused. As a newly formed family office, we’ve spent much of 2017 expanding beyond our existing relationships with business owners and intermediaries, communicating what makes our firm different to new partners.  Legacy Ventures is somewhat unique in that our investment team is comprised entirely of family members that are providing the capital for our transactions.  Our family-focused structure allows us to relate well with entrepreneurs and family-owned businesses that we’re partnering with.

Axial: What are the up and downs you have experienced in 2017?

Legacy: From an M&A perspective, the market has been attractive for deals in our size range because there are so many smaller businesses that have ample room to grow.  PE players with larger funds have had challenges deploying capital as valuations for bigger companies reached what may be unsustainably high multiples across many sectors, but we’ve been insulated given our criteria and flexible investment horizon.  General awareness of the many family offices out there has been an area that’s been challenged as sellers and intermediaries familiarize themselves with the offices’ structures, goals, and capabilities, but it’s moving in the right direction.

Axial: What are your expectations for 2018?

Legacy: We expect many of the same trends prevalent in 2017 to continue into 2018 and it’ll be interesting to see what impact the new tax code will have.  Our firm plans to make investments in several new platforms in 2018 while we continue to focus on growth within our existing portfolio.

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