Sale : an alternative succession route for family firms: Valuation issues and acquirers’ perception

Family firms form the majority of organizations around the world, but only few survive beyond the first generation. However, very little has been said about succession routes alternative to intergenerational transfer. This thesis focuses on sale of family businesses, with a particular emphasis on valuation and acquirers’ perception of family firm targets. In order to cope with the research objective, a variety of methods were implemented, some of which have never been employed in previous family business studies. The research is divided into the following three chapters, each one corresponding to a paper: 1. Measures of Value in Acquisitions: Family versus Non-Family Businesses 2. Family Firms in the Eyes of Private Equity Companies 3. Family Firms – Risky Acquisition Targets? The focus of the first paper is to compare valuations of privately-held family versus non-family business targets in the acquisition context. Our main finding is that although most theoretical and empirical research explicitly recognizes the prevalence and superior performance of family businesses around the world, acquirers are unable to recognize the advantages associated with family businesses and thus acquire them at a discount as compared to non-family business counterparts. The second and third papers analyze the perception of family firm targets by an important class of acquirers, private equity firms. Family firm targets are perceived to be riskier by their acquirers and this can have negative influence on the valuation. It is concluded that the perception of risk, even though not always corresponding to the actual levels of risk, influences investors’ behavior

Measures of value in acquisitions: Family versus nonfamily firms

This article sheds light on the valuation of family firms when compared with nonfamily firms as acquisition targets. The authors argue that although the majority of theoretical and empirical research explicitly recognizes the prevalence and superior performance of family firms around the world, acquiring companies tend to regard family firms as unprofessional and inefficient organizations, thus negatively affecting their valuation when compared with nonfamily firm targets. Overall, the authors’ empirical analysis, based on a matched-pairs methodology and use of multiples, shows that acquiring companies favor the stagnation perspective rather than the stewardship perspective and thus pay less (i.e., acquire at a discount) for a family firm target than for a nonfamily firm target

Measures of value in acquisitions : Family versus non family firms

This article sheds light on the valuation of family firms when compared with nonfamily firms as acquisition targets. The authors argue that although the majority of theoretical and empirical research explicitly recognizes the prevalence and superior performance of family firms around the world, acquiring companies tend to regard family firms as unprofessional and inefficient organizations, thus negatively affecting their valuation when compared with nonfamily firm targets. Overall, the authors’ empirical analysis, based on a matched-pairs methodology and use of multiples, shows that acquiring companies favor the stagnation perspective rather than the stewardship perspective and thus pay less (i.e., acquire at a discount) for a family firm target than for a nonfamily firm target