In recent years, a growing number of wealthy families entering the equity
market have been seeking direct investments. But how do these actively investing
families (family investors, henceforth) behave compared to non-family investors
such as private equity (PE) firms? Answering this is particularly interesting from the
investee firms’ perspective of family businesses, as the mindset of family investors
might be more similar to their own. However, studies so far have neglected to
distinguish between different investors in family firms. Thus, this conceptual paper
aims to improve the understanding of family and PE investors and to consider the
conditions and decision criteria under which family firms seek an external investor.
To fulfil this goal, the two investor types are systematically compared, and based on
multiple theoretical perspectives, a model of which investor type would best fit with
family firms and their specific challenges is proposed. Thereby, we argue that the
two investor types might be suitable partners for the investee firms depending on the
challenges they face.