Two Sides of the Same Coin: Family Firms and the Performance of Acquisitions and Divestitures

Emilie Feldman, Professor of Management, The Wharton School; Raffi Amit,  Professor of Management, The Wharton School; and Belen Villalonga, NYU Stern School of Business

Abstract: In this project, I seek to compare how effectively family firms undertake and implement acquisitions and divestitures relative to their non-family counterparts. Together with Raffi Amit and Belén Villalonga, I recently published a piece in the Strategic Management Journal, (“Corporate Divestitures and Family Control”), which established that while family firms are less likely than non-family firms to undertake divestitures, the stock market returns earned by the family firms that undertake these deals exceed those of non-family firms. We find evidence that it is the existence of family-specific preferences to avoid divestitures that drives these discrepancies between family and non-family firms, raising two important questions:

First, does the existence of family-specific preferences affect the outcomes of other corporate development activities undertaken by these companies—in particular, acquisitions? And second, drawing on the insight that acquisitions and divestitures are two sides of the same coin (i.e., acquiring firms buy the assets that divesting firms sell to them), how does the presence or absence of family-specific preferences influence the relative performance of the acquiring and divesting firms that are involved in a given transaction?

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