Publication Date:
2011
abstract:
Family firms form the majority of organizations around the world (Burkart, Panunzi, &
Shleifer, 2003). However, only few survive beyond the first generation (Poza, 2007).
Traditionally, intergenerational succession has been equated to the success of a family firm.
Passing the firm on to children was always regarded as the central task. This fact is mirrored in
the family business literature with succession being the most researched domain. However, very
little has been said about succession routes alternative to intergenerational transfer (Goosens,
Manigart & Meuleman, 2008, Scholes, Wright, Westhead, Burrows, & Bruining, 2007; Vought,
Baker, & Smith, 2008). The view that handing over the family firm to the children is the only
way to go appears somewhat limited and distant from the reality. Indeed, family business owners
often use the term “pass along” to mean both transferring ownership to the next generation and
selling the firm to pass along the wealth created by the business (Vought et al., 2008). In effect,
some families want and can be passed on to multiple generations, while others may be unwilling
or unable to do so. Empirical research suggested that some owners may perceive that there are no
suitable family members to whom ownership and leadership can be transferred (Wright,
Thompson, & Robbie, 1992; Bierly, Ng, & Godfrey, 1999). Accordingly, for some business
families an exit can be a positive choice (Birley et al., 1999). Consequently, more research is
needed that would recognize a sale as a viable option for a family firm and cover this and other
alternative succession routes.
The research focuses on an alternative succession route for family businesses, i.e. sale, with
a particular emphasis on valuation and acquirers’ perception of family firm targets. In order to
cope with the research objective, I implemented a variety of methods, some of which have never
been employed in previous family business studies.
In the "Family Firms in the Eyes of Private Equity Companies"
we analyze the perception of family firm targets by an important
class of acquirers, private equity firms. The research has an exploratory character and was
meant to lay the ground for the overlooked topic of family firm acquisitions and in particular to
examine this topic from the acquirers’ perspective. We found that one half of the private equity
professionals surveyed flag the fact that a potential acquisition target is a family firm, but only for
a third this difference would translate into valuation, mostly a discount. To some extent, this is
explained by the higher risk attributed to family firm targets. We also noted that private equity
professionals may equate family firms to small businesses.
Shleifer, 2003). However, only few survive beyond the first generation (Poza, 2007).
Traditionally, intergenerational succession has been equated to the success of a family firm.
Passing the firm on to children was always regarded as the central task. This fact is mirrored in
the family business literature with succession being the most researched domain. However, very
little has been said about succession routes alternative to intergenerational transfer (Goosens,
Manigart & Meuleman, 2008, Scholes, Wright, Westhead, Burrows, & Bruining, 2007; Vought,
Baker, & Smith, 2008). The view that handing over the family firm to the children is the only
way to go appears somewhat limited and distant from the reality. Indeed, family business owners
often use the term “pass along” to mean both transferring ownership to the next generation and
selling the firm to pass along the wealth created by the business (Vought et al., 2008). In effect,
some families want and can be passed on to multiple generations, while others may be unwilling
or unable to do so. Empirical research suggested that some owners may perceive that there are no
suitable family members to whom ownership and leadership can be transferred (Wright,
Thompson, & Robbie, 1992; Bierly, Ng, & Godfrey, 1999). Accordingly, for some business
families an exit can be a positive choice (Birley et al., 1999). Consequently, more research is
needed that would recognize a sale as a viable option for a family firm and cover this and other
alternative succession routes.
The research focuses on an alternative succession route for family businesses, i.e. sale, with
a particular emphasis on valuation and acquirers’ perception of family firm targets. In order to
cope with the research objective, I implemented a variety of methods, some of which have never
been employed in previous family business studies.
In the "Family Firms in the Eyes of Private Equity Companies"
we analyze the perception of family firm targets by an important
class of acquirers, private equity firms. The research has an exploratory character and was
meant to lay the ground for the overlooked topic of family firm acquisitions and in particular to
examine this topic from the acquirers’ perspective. We found that one half of the private equity
professionals surveyed flag the fact that a potential acquisition target is a family firm, but only for
a third this difference would translate into valuation, mostly a discount. To some extent, this is
explained by the higher risk attributed to family firm targets. We also noted that private equity
professionals may equate family firms to small businesses.
Iris type:
Capitolo di Libro
Keywords:
Family business sale; private equity firms; exploratory research; content analysis.
List of contributors:
Granata, D.; Gazzola, Patrizia
Book title:
Sale: An alternative succession route for family firms: Valuation issues and acquirers' perception