Surviving Generational Transition in Family-Owned Businesses

Family-owned businesses are the backbone of the U.S. economy—but most won’t survive past the second generation. The good news? There’s a strategic alternative that many owners overlook.

The Reality of Family Business Transition

Here are a few eye-opening stats:

• 80% of businesses worldwide are family-owned

• These businesses generate over 60% of U.S. employment and create 70%+ of new jobs

• They contribute around $5 trillion annually to U.S. GDP

Despite their importance, the odds of lasting success are bleak:

• Only 30% of family businesses make it to the second generation

• Just 12% survive to the third

The reasons go beyond estate planning or insurance shortfalls. The real challenge? Internal dynamics.

From financial structures to operational habits and culture, many family businesses aren’t built to withstand generational handoff. That’s where a different approach can tip the odds.

An Overlooked Strategy: Private Equity Partnership

One powerful but underutilized option for family businesses in transition is to bring in a private equity (PE) partner.

But first, let’s clear up a common misconception:Private equity is often painted as ruthless or predatory—but that stereotype doesn't reflect today’s lower-middle-market reality. Many PE groups actively partner with family businesses, offering both capital and collaboration, not just control.

Why Consider a Private Equity Partner?

For the senior generation, a PE deal offers:

• A meaningful liquidity event at retirement

• Freedom from uncertain installment-based payouts

• Greater security as they exit the business

For the next generation, it provides:

• Growth capital to scale the business

• Strategic support from experienced partners

• Operational, financial, and leadership resources

In short, a private equity partner can bridge the gap between generations—giving the company the financial and strategic backing to move forward without losing its family identity.

Is Your Family Business Facing a Transition?

If you're considering retirement or succession planning, don’t overlook this option. A private equity partnership may offer the stability and vision your business needs to thrive under the next generation.

Explore how a strategic partnership can help your family business beat the odds. Contact CRI M&A Advisors to discuss a transition strategy tailored to your future.

Statistics presented in this post are derived from multiple sources for the years 2013 and 2014.  Sources include research and articles provided by Harvard Business Review, kpmgfamilybusiness.com and family business institute.com