In late 2023, a well-known Canadian tech media outlet quietly changed hands, but not to a publishing conglomerate or an institutional investor. Rather, it sold to a husband-and-wife team with deep entrepreneurial roots.
The pair of former executives with a large publicly traded Canadian tech company, took a controlling stake in a leading start-up and innovation publication. Through their Toronto-based family office, they’re investing directly in companies, in part to fund new ideas.
What makes this deal notable isn’t just the players involved, but what it signals. The acquisition reflects a growing trend among Canada’s ultrawealthy to use family offices to acquire private companies, rather than relying solely on public markets or institutional funds for returns.
“It’s a trend that has been growing with an acceleration in the last few years,” says John Paniccia, BMO Private Wealth’s Vice President and Head of Business Advisory & Succession Planning. “They’re increasingly looking for direct investments in private companies. It’s a way to diversify from traditional asset classes and reinvest wealth into the community and other enterprises.”
A perfect storm of opportunity
Several factors are fueling this trend. First, there’s Canada’s looming succession wave, putting trillions of dollars in business assets into motion.
“Baby boomers and their families are selling businesses and generating significant wealth that family offices are looking to reinvest,” Paniccia explains.
“We know that 76% of Canadian business owners plan to exit their business in the next 10 years, representing more than $2 trillion in business assets that are expected to change hands,” says Paniccia. “Just by the very nature of these opportunities coming up, it’s going to drive transactions.”
Many of those businesses are not succession-ready, creating opportunities for discounted valuations – exactly what savvy family office buyers seek.
“They haven’t adequately prepared for succession,” Paniccia explains. “If some unforeseen event happens – like a medical issue – they will be put in a vulnerable position limiting their options and often leading to depressed valuations.”
Meanwhile, wealth continues to grow. Globally, families with family offices are expected to be worth an estimated US$9.5 trillion in 2030, an increase from US$5.5 trillion dollars today. Total assets under management within family offices are estimated to expand to US$5.4 trillion in five years, up from US$3.1 trillion now. “With increasing family wealth in Canada, particularly among families with family offices, there is more capital available for investment in both public and private markets,” says Paniccia.
The hunt for quality
The acquisition process starts with what Paniccia calls an “investment thesis,” which involves the family, along with their advisors, determining their main objectives, which industries they may or may not be interested in, as well as the target size of companies. It might also mean defining geographic preferences, management involvement levels and capital allocation strategy.
Some family offices want hands-on involvement and have professionals in-house to help run operations. Others prefer to remain behind the scenes and retain existing management – often with equity incentives to ensure alignment.
“We are seeing more professionalization of family offices,” Paniccia explains. “Family offices are becoming more sophisticated, with larger teams and more resources dedicated to in-house expertise with direct investment and management capabilities.”
Sourcing deals can happen through multiple channels. BMO wealth and commercial professionals, for example, work closely with business owners preparing for sale. The search can also involve trusted lawyers, accountants, and M&A firms with mid-market expertise.
“Everyone wants those ‘Type A’ companies,” says Paniccia, which includes operations that have a strong management team, stable-strong cash flows, high growth potential, diversified revenues and customer base, and a market that’s conducive to sustainable future growth.
The sweet spot
Unlike traditional private equity, which tends to be involved in five-year investment cycles, family offices are typically in it for the longer haul. Holding periods can last a decade or sometimes indefinitely, as long as companies generate acceptable returns.
This strategy allows them to focus on long-term value creation rather than quick exits. It also shapes deal selection. While transaction sizes vary considerably, the lower mid-market space is particularly attractive to family offices when identifying acquisitions targets “That’s the sweet spot,” he notes.
“Family offices have capital, and with capital comes borrowing ability,” Paniccia says. “It’s not all equity they’re putting in. They will use leverage to help optimize the return on total invested capital and they maintain control.”
The entrepreneurial instinct
For many ultrawealthy families, buying companies is a return to the same business-building instincts that helped generate their wealth in the first place.
“There’s an element of that entrepreneurial spirit,” says Paniccia. “They built wealth through various means including private enterprises, had success in selling and realize there’s a lot of potential if you find the right company.”
For the owners looking to sell, family offices bring more than just capital. They also bring patience, longer-term investment horizons, operational insight and, often, deep industry knowledge. Some actively oversee their portfolio companies. Others rely on professionals to scout and manage deals before getting final sign-off from the family.
“Family offices often seek greater control over their investments and prefer customized strategies, making them suitable partners for private companies,” says Paniccia.
“It’s quite rewarding to see how these families operate,” he adds. “But there’s also an element of risk. It’s key to work with the right advisors who have the experience and expertise to guide the process and make sound decisions.”
