Family firm in the eyes of private equity companies

.Family firms form the majority of organizations around the world (Burkart, Panunzi, & Shleifer, 2003). However, only few survive beyond the first generation (Poza, 2007). Traditionally, intergenerational succession has been equated to the success of a family firm. Passing the firm on to children was always regarded as the central task. This fact is mirrored in the family business literature with succession being the most researched domain. However, very little has been said about succession routes alternative to intergenerational transfer (Goosens, Manigart & Meuleman, 2008, Scholes, Wright, Westhead, Burrows, & Bruining, 2007; Vought, Baker, & Smith, 2008). The view that handing over the family firm to the children is the only way to go appears somewhat limited and distant from the reality. Indeed, family business owners often use the term “pass along” to mean both transferring ownership to the next generation and selling the firm to pass along the wealth created by the business (Vought et al., 2008). In effect, some families want and can be passed on to multiple generations, while others may be unwilling or unable to do so. Empirical research suggested that some owners may perceive that there are no suitable family members to whom ownership and leadership can be transferred (Wright, Thompson, & Robbie, 1992; Bierly, Ng, & Godfrey, 1999). Accordingly, for some business families an exit can be a positive choice (Birley et al., 1999). Consequently, more research is needed that would recognize a sale as a viable option for a family firm and cover this and other alternative succession routes. The research focuses on an alternative succession route for family businesses, i.e. sale, with a particular emphasis on valuation and acquirers’ perception of family firm targets. In order to cope with the research objective, I implemented a variety of methods, some of which have never been employed in previous family business studies. In the "Family Firms in the Eyes of Private Equity Companies" we analyze the perception of family firm targets by an important class of acquirers, private equity firms. The research has an exploratory character and was meant to lay the ground for the overlooked topic of family firm acquisitions and in particular to examine this topic from the acquirers’ perspective. We found that one half of the private equity professionals surveyed flag the fact that a potential acquisition target is a family firm, but only for a third this difference would translate into valuation, mostly a discount. To some extent, this is explained by the higher risk attributed to family firm targets. We also noted that private equity professionals may equate family firms to small businesses.