Closing a Deal with a Family Office

Seems like everyone loves a deal closing, even more than a deal falling apart. My post last week about closing a deal with a local operator was one of my better performers, just edging out the one about our manufacturing deal that fell apart. Apparently, success is “like”able.

That post also triggered a flood of new connection requests. I get it, the logic goes: if you’ve closed one deal, you’re ready to close more. You’re “for real.”

While I’m flattered, I also want to put our deal cadence in context, and maybe reset expectations a bit for anyone thinking family offices are closing deals every week.

Our Setup

As I’ve said before, “if you’ve met one family office, you’ve met one family office.” Each platform is its own animal, from who it serves to how it invests.

We’re unique because we only make direct investments. No LP commitments to funds. No outsourced management. Just direct deals with companies, operators, and founders. That’s rare in the family office world. Most are allocators, great at underwriting fund managers, less experienced at underwriting operating businesses.

We’re direct investors for a few reasons:

·         The family we represent is values-driven. They want to prove business can be a force for good and still deliver great returns. That’s the core of our 4D Wealth thesis.

·         Direct deals have higher risk, but also higher upside. No layers of fees or dilution.

·         We can structure deals that share more of the win with the people actually doing the work.

·         We can walk away from anything that doesn’t fit. We’re not chasing AUM growth or forced deployment.

This setup gives us something a lot of investors don’t have: discipline and alignment.

The Numbers

For perspective, here’s our lower middle market PE deal flow through 9/30 this year:

·         Deals Seen: ~350

·         NDAs/CIMs Reviewed: ~50

·         LOIs Submitted: ~10

·         Deals Closed: 3

That’s about a 1% close rate. Sounds low, but that’s reality in this business. Our early-stage capital team sees even more deals with roughly the same hit rate. The truth is, we look at a lot to find the very few we’re genuinely excited to partner with.

In a world where VCs spray and pray, and Berkshire gets flak for sitting on cash, we’re perfectly fine missing a few winners if it means avoiding a lot of disasters. The deal is the easy part. Execution is the grind.

Our Portfolio Target

My goal is simple for ARP, close one or two new deals a year.

That pace builds a concentrated portfolio, 5 to 7 companies max. Anything more, we lose focus and effectiveness. If I can’t have meaningful weekly conversations with each operator, I’m not doing my job for the family or the company.

We’re long-term partners, not fund managers with a sell-by date. We’ll exit when timing and alignment are right, not when a fund clock chimes. So, while our pipeline is robust, we don’t have the same urgency to chase deals as the funds we compete with, which is ok for everyone.

What My Peers Say

While our direct model is less common, the selective mindset is not. Most family offices I talk with keep tight, focused portfolios and only add incrementally each year, regardless of their AUM.

Family offices like what (and who) they know. They invest where they have internal conviction or prior success. The bigger the checkbook, the slower the hand tends to move.

Advice for Those Raising from or Selling to Family Offices

If you’re looking for capital from a family office, here’s what I tell people:

1.      Trust is the currency: Warm intros and shared relationships are everything. Cold calls / emails / connections go nowhere.

2.      Know their lane: If the office made its wealth in your space, you’ve got a shot. If not, it’s an uphill climb.

3.      They’re not “dumb money”: Passion projects exist, but everything else gets underwritten with institutional rigor.

4.      Do your own diligence: Family offices vary widely in governance and decision-making. The wrong fit on either side can turn a partnership into a headache.

Final Thought

I can’t promise when the next post for a deal closing will be, but when it comes, you’ll know it’s one worth writing about. Until then, we’ll keep grinding through the pipeline, staying patient, and betting on the right people for the long run.