Beyond some of the aforementioned issues the Michigan Opportunity Fund principals take with the broader state of the private equity industry, the emerging group also seeks to be a solution for another issue facing much of the state’s businesses: the lack of a clear succession plan.
While being a family-owned a business is not a requirement the fund plans to put in place, DeVos and others said that just given the makeup of the state’s business landscape and types of industries in which they’ll be active, family-owned businesses are sure to be among the fund’s portfolio.
Available data varies, but multiple studies have found that a large number of family-owned businesses — nearly 80 percent, according to a 2014 report from the Family Owned Business Institute at Grand Valley State University — have not begun planning for succession.
The owners of those types of companies are looking for more localized options than strategic buyers they don’t know or out-of-state PE buyers, according to Helminski with Auxo.
“They would prefer an option in state that has a different level of familiarity and comfort and shared value systems, and usually one to two degrees of separation between people that they know,” Helminski said. “That would be more appealing to them, but it just doesn’t really exist today.”
The fund’s backers say they’re largely industry-agnostic, but the state’s key sectors — manufacturing, transportation and logistics, agriculture and health care — are sure to be chief among the areas targeted for investment.
While the fund still remains in its infant stages, DeVos said he can look two years down the road and see the concept having begun to take hold and have a positive impact on the state’s business community.
“So you hope in two years you’re looking back saying, ‘Hey, we stayed on track, we stayed true to our values,'” DeVos said, adding that by that time the group will have “made the operational adjustments we needed to make, because nothing is ever static or simple as it seems.”