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Information Sharing, Price Negotiation and Management Buy-outs of Private Family-owned Firms

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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 achieved. 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 family 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 achieved. Implications for practitioners and researchers are discussed.

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Authors and Affiliations

  1. Center for Management Buy-Out Research, Nottingham University Business School, Jubilee Campus, Wollaton Road, Nottingham, NG8 1BB, UK

    M. Louise Scholes & Andrew Burrows

  2. Business School, University of Nottingham, Jubilee Campus, Cnt. for Management Buy-Out Research, Nottingham, NG8 1BB, UK

    Mike Wright

  3. University of Nottingham Institute for Enterprise and Innovation, Nottingham University Business School, Jubilee Campus, Wollaton Road, Nottingham, NG8 1BB, UK

    Paul Westhead

  4. Department of Strategy, Erasmus University, Rotterdam, Netherlands

    Hans Bruining

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  1. M. Louise Scholes
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  2. Mike Wright
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  3. Paul Westhead
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  4. Andrew Burrows
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  5. Hans Bruining
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Correspondence to Mike Wright.

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Scholes, M.L., Wright, M., Westhead, P. et al. Information Sharing, Price Negotiation and Management Buy-outs of Private Family-owned Firms. Small Bus Econ 29, 329–349 (2007). https://doi.org/10.1007/s11187-006-9024-z

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