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Demand for private equity minority investments: A study of large family firms

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  • Tappeiner, Florian
  • Howorth, Carole
  • Achleitner, Ann-Kristin
  • Schraml, Stephanie
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    Abstract

    Private equity is invested mostly in established firms, of which family businesses are the dominant form. Under the pecking order hypothesis, private equity is a finance of last resort. Tests of the pecking order and its assumptions have provided conflicting results. For family firms, the pecking order hypothesis is incomplete because it ignores family effects. Case studies of 21 large family firms in Germany are analysed. Testable propositions are derived. Family firm owners balanced financial and non-financial resources of private equity with the need to cede control rights. Non-financial resources were valued more highly when resolving family issues. The observed pecking order was driven by control rights. Important implications for family firms and investors are discussed.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Family Business Strategy.

    Volume (Year): 3 (2012)
    Issue (Month): 1 ()
    Pages: 38-51

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    Handle: RePEc:eee:fambus:v:3:y:2012:i:1:p:38-51

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    Related research

    Keywords: Private equity; Family business; Finance; Pecking order; Control; Resources;

    References

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    Cited by:
    1. Fitó, M. Àngels & Moya, Soledad & Orgaz, Neus, 2013. "The debate on rented assets capitalization: The economic impact on family firms," Journal of Family Business Strategy, Elsevier, vol. 4(4), pages 260-269.

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