Information Sharing, Price Negotiation and Management Buy-Outs of Private Family-Owned Firms

36 Pages Posted: 30 Apr 2007

See all articles by Mike Wright

Mike Wright

Nottingham University Business School

Louise Scholes

Loughborough University London

Paul Westhead

University of Warwick - Warwick Business School

Andrew Burrows

Nottingham University Business School (NUBS)

Hans Bruining

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

Abstract

Perspectives relating to agency theory, information asymmetries and game theory were utilized to explore two outcomes associated with the management buy-out (MBO) or management buy-in (MBI) of former private firms: whether information was shared equally between vendors (i.e., family firm owners) and purchasers (i.e., MBO/I management teams) and whether a mutually agreed price was agreed. With reference to the themes of company ownership structure, governance structure and company objectives several hypotheses were derived. Survey evidence was gathered from the managers of 114 former private family-owned firms located across Europe that recently reported an MBO/I. Multiple logistic regression analysis detected that respondents in founded (first generation) family firms and those reporting a high focus on the strategic importance of the market value increment were more likely to report that "information was shared equally between vendors and purchasers." Respondents reporting no suitable successor had been identified, a high focus on the strategic importance of the market value increment, and the involvement of venture capitalists in succession planning were more likely to report that a mutually agreed sale price had been negotiated. Implications for practitioners and researchers are discussed.

Keywords: Family firms, succession, management buy-out, information asymmetry, negotiation behaviour, corporate governance

JEL Classification: G32, G34

Suggested Citation

Wright, Mike and Scholes, Louise and Westhead, Paul and Burrows, Andrew John and Bruining, Hans, Information Sharing, Price Negotiation and Management Buy-Outs of Private Family-Owned Firms. Small Business Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=982896

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)

Louise Scholes (Contact Author)

Loughborough University London ( email )

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

Paul Westhead

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom
+44 0 24 7652 2073 (Phone)

HOME PAGE: http://www.wbs.ac.uk/faculty/members/paul/westhead

Andrew John Burrows

Nottingham University Business School (NUBS) ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
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

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