CEF.UP – FIN Seminar

Thursday – February 20^th, 2025 at 13:00h | Room 305

How Are Family Firms Sold to Private Equity?

Benjamin Hammer – Lancaster University (England, United Kingdom)

Abstract:

“Grounded in socioemotional wealth theory and auction theory, this study examines the sale of private firms to private equity acquirers, comparing family and non-family firm sellers, and how the chosen sales method affects the seller’s revenue in these transactions. Relying on a hand-collected dataset of 617 European buyouts from 1999 to 2021, we find that family firms are more likely to be sold through one-on-one negotiations rather than full-scale auctions, in contrast to their non-family counterparts. Our empirical findings also reveal that family firms secure significantly lower relative purchase prices in negotiated transactions relative to auctions in comparison to non-family firms. Furthermore, within the family firm cohort, those opting for one-on-one negotiations achieve lower relative purchase prices than they could potentially realize through a competitive sales process. Collectively, our results underscore the importance of socioemotional considerations in family firm divestitures and highlight the financial implications of sales process selection.”