Private Equity in Family Firms: An Empirical Analysis of Psychological Aspects in Transaction Decisions (Private Equity in Familienunternehmen: eine empirische Untersuchung zu psychologischen Aspekten der Transaktionsentscheidung)
Finanz Betrieb, Vol. 7, No. 5, pp. 289-295, 2005
7 Pages Posted: 21 Jul 2008
Date Written: 2005
Private equity investments in family firms are so far only barely covered in academic research. In particular, the initiation process leading towards a successful private equity deal has to be better understood. Thereby, not only the formal process steps but also the personal relationships between private equity investors and family firms' owners have to be analyzed. Psychological barriers of family firms towards private equity investors regularly complicate the transaction process and are sometimes even responsible for the failure of negotiations.
Therefore, this paper elaborates on psychological barriers that hamper private equity transactions in family firms. The two-staged qualitative study of this paper includes in a first step explorative interviews with experts. Based on these findings, socio-psychological theoretical constructs are identified and refined. In a second step, semi-structured interviews test resulting hypotheses and enhance generated insights.
The results show that diverging mentalities, prejudices and selective information gathering by family firms are responsible for the failure of initiated private equity transactions. In addition, findings draw attention to the role of so-called mediaries (e.g. tax advisors or lawyers) who can ease the transaction process. They are familiar with the respective mentalities and doubts. As they are accepted cooperation partners of family firms and private equity investors, they can serve as helpful process catalysts.
The document was made available by courtesy of the publisher Fachverlag der Verlagsgruppe Handelsblatt.
Note: Downloadable document is in German.
Keywords: Private equity, Family Firms, Familienunternehmen, prejudices, mediaries, Vorurteile, Psychologie
JEL Classification: G32, G34, G24
Suggested Citation: Suggested Citation