Strategic Changes in Family Firms Post-Management Buyout: Ownership and Governance Issues

27 Pages Posted: 30 Jan 2009

See all articles by Louise Scholes

Louise Scholes

Loughborough University London

Mike Wright

Nottingham University Business School

Paul Westhead

Durham University

Hans Bruining

Erasmus University Rotterdam (EUR) - Department of Strategic Management and Entrepreneurship; Erasmus Research Institute of Management (ERIM)

Oliver Kloeckner

Technische Universität München - Center for Entrepreneurial and Financial Studies

Date Written: November 17, 2008

Abstract

When no suitable family successor can be identified, private family firm owners may select a management buyout (MBO) or a management buy-in (MBI) exit route. After a private equity backed MBO/I, new owners may select strategies that encourage superior firm performance. We explore the strategic orientation of former private family firms pre- and post-MBO/Is. Ownership and governance issues are considered. Following insights from agency and stewardship theory, several hypotheses are derived. We utilize a unique hand-collected representative sample of 104 MBO/Is located across Europe. Univariate analysis suggests greater scope for efficiency gains and growth in cases where the founder was present at time of buyout, where no managers with equity stakes or non-executive directors were employed pre-buyout, and where the private equity investor and management were involved in succession planning. Multinomial logistic regression suggests efficiency gains in firms with no equity holding non-family managers pre-buyout. Conclusions and implications are discussed.

Keywords: Family firm, succession, management buyout, private equity, ownership, governance, strategy

Suggested Citation

Scholes, Louise and Wright, Mike and Westhead, Paul and Bruining, Hans and Kloeckner, Oliver, Strategic Changes in Family Firms Post-Management Buyout: Ownership and Governance Issues (November 17, 2008). Nottingham University Business School Research Paper No. 2008-05, Available at SSRN: https://ssrn.com/abstract=1302967 or http://dx.doi.org/10.2139/ssrn.1302967

Louise Scholes (Contact Author)

Loughborough University London ( email )

Here East
Queen Elizabeth Olympic Park
London, E15 2GZ
Great Britain

Mike Wright

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom
+44 115 951 5257 (Phone)
+44 115 951 5204 (Fax)

Paul Westhead

Durham University ( email )

Old Elvet
Mill Hill Lane
Durham, Durham DH1 3HP
United Kingdom

Hans Bruining

Erasmus University Rotterdam (EUR) - Department of Strategic Management and Entrepreneurship ( email )

RSM Erasmus University
Rotterdam, 3000 DR
Netherlands

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Oliver Kloeckner

Technische Universität München - Center for Entrepreneurial and Financial Studies ( email )

Arcisstr. 21
Munich, 80333
Germany

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