SCHOLES, L. ... et al., 2010. Strategic changes in family firms post management buyout: ownership and governance issues. International Small Business Journal, 28 (5), pp. 505 - 521.
When no suitable family successor can be identified, private family firm owners may select a
management buyout (MBO) or a management buyin (MBI) exit route. After a private equity
backed MBO/I, new owners may select strategies that encourage superior firm performance. We
explore the strategic orientation of former private family firms pre- and post-MBO/Is. Ownership
and governance issues are considered. Following insights from agency and stewardship theory,
several hypotheses are derived and tested with reference to a representative sample of 104 MBO/
Is located across Europe. Univariate analysis suggests greater scope for efficiency gains and growth
in cases where the founder was present at time of buyout, where no managers with equity stakes
or non-executive directors were employed pre-buyout, and where the private equity investor
and management were involved in succession planning. Multinomial logistic regression suggests
efficiency gains in firms with no equity holding non-family managers pre-buyout. Conclusions and
implications are discussed.