Wealthy Founders Are Buying Companies as Inheritance for Their Kids

A 60-something technology founder on the West Coast sold his company two years ago, parked part of the proceeds in a family limited partnership, and then did something more interesting: he bought a private specialty manufacturer in the Pacific Northwest so his daughter could learn the business from the finance department. That deal, described by Eric Czepyha, director of business services at Chicago-based Northern Trust, captures a growing pattern among wealthy entrepreneurs — treating an acquisition as both a training ground and an inheritance vehicle for adult children.

The parents in this cohort typically share two traits. They sold a business at a premium in the past few years and have spare cash to deploy. And they want more for their children than a nest egg — they want to hand them purpose, a learning experience and a framework for long-term success.

Why buy a business instead of leaving cash?

For older entrepreneurs who aren't ready to fully retire, buying and growing a business with their children becomes part hobby, part apprenticeship. "Business owners don't typically retire in the traditional sense. They love to be active, and they love to have their brains active," Czepyha says.

His West Coast client could have left the trust assets in a conventional portfolio, but he found that too passive. He bought the manufacturer instead — a company built slowly by a longtime owner who knew which machines caused trouble and which customers called on weekends. The seller stepped away; the management team stayed, which preserved continuity. The father took the roles of owner and chairman, focused on strategy, and left daily operations to the people who already knew the business. His daughter, fresh out of college and working as a consultant, joined the finance department in an entry-level role matched to her experience, learning how the company made money, why margins moved and how capital got allocated.

There's no three-to-five-year exit plan and no private-equity countdown clock. The father is already weighing whether the company could become a platform for further acquisitions, with his daughter building the experience to help lead it one day.

What are the caveats?

Plenty, according to the advisors. Not every family has the affluence to buy a business in the first place. A private company is a concentrated, illiquid investment, so Czepyha says a family must size how much of its wealth is at risk and settle the long-term plan — especially when some children work in the business and others don't.

"Families should talk through ownership and economics early, including whether the ultimate goal is to sell the business someday or keep it in the family," Czepyha says. "Those conversations are much harder after the investment has already been made."

Roles need defining before the purchase, not after. How involved will the parent actually be? Does the child have room to learn, make decisions and ultimately lead? Is the child qualified and genuinely interested? If expectations aren't set upfront, what was meant to bring a family together can breed resentment — between parent and child, and among nonfamily managers. "It can be catastrophic for the financial and relationship outcome," says Joe Strazzeri, a San Diego-based counselor and attorney for families and business owners. "Just remember, it's your family first."

Strazzeri's files show both the risk and the payoff. One client's stepdaughter lost her job at a landscaping company when it sold; a minority stake and a non-compete blocked her from starting a rival. Her stepfather funded a design business instead — he provides contacts and capital, she runs daily operations, and a trust will eventually revert his ownership stake to her or her children. Another client, a widow who built a cosmetics company, sold it and used the proceeds to buy a technology firm better suited to her 20-something son's talents. Five years on, the business is growing steadily and he's fielding unsolicited offers.

How are families finding targets?

Julie Keyes, an exit planning consultant and founder of KeyeStrategies in Minneapolis, has a client in his early 50s weighing a business purchase for each of his four children, all college graduates in their 20s. He wants them to become entrepreneurs — but not on a silver platter. With the children's buy-in, he's researching targets based on their individual talents and the market, favoring companies with leadership teams already in place where the kids can work their way up, earn respect, hold an ownership position, and eventually buy him out. "This is a fluid thing, but this is their vision," Keyes says.

The supply side helps: private-equity firms are sitting on large inventories of companies, giving buyers a deep pool of targets. The discipline, the advisors agree, is in the family conversation — before the check is written.