Is it All About Money? – Affective Commitment and the Difference Between Family and Non‐family Sellers in Buyouts

AuthorMike Wright,Andreas Hack,Oliver Ahlers,Kristen Madison,Franz W. Kellermanns
Date01 April 2017
Published date01 April 2017
British Journal of Management, Vol. 28, 159–179 (2017)
DOI: 10.1111/1467-8551.12178
Is it All About Money? – Aective
Commitment and the Dierence Between
Family and Non-family Sellers in Buyouts
Oliver Ahlers, Andreas Hack,1Kristen Madison,2Mike Wright3
and Franz W. Kellermanns4
Witten Institute for Family Business, University Witten/Herdecke, Alfred-Herrhausen-Str. 50, D-58448, Witten,
Germany, 1Institute for Organization and Human Resource Management (IOP), University of Bern,
Engehaldenstrasse 4, CH-3012 Bern, Switzerland, and Witten Institute for Family Business, University
Witten/Herdecke, Germany, 2College of Business, Department of Management and Information Systems,
Mississippi State University, USA, 3Centre for ManagementBuyout Research, Imperial College Business
School, Tanaka Building, South Kensington Campus, London, UK, and Ghent University, Faculty of
Economics and Business Administration, Hoveniersberg 4, Ghent, Belgium, and 4Department of Management,
University of North Carolina-Charlotte, 9201 University City Blvd, Charlotte, NC 28223-0001, USA, and
INTES Center for FamilyEnterprises, WHU (Otto Beisheim
School of Management), Germany
In this paper we investigate private equity firm perceptions of sellers’ aectivedeal com-
mitment in buyout transactions.Using a sample of 174 buyouts, we test trust, goal congru-
ence and private equity reputationas potential antecedents of perceived deal commitment.
We also examine whether and how dierent types of sellers, family versus non-family
firms, moderate sources of perceived aectivedeal commitment. In sum, we find evidence
that non-financial factors play a role in buyouts, particularly for family firm sellers.
The main investments of private equity (PE) firms
involve buyouts in which PE firms negotiate deals
with the current owners to form a new corporate
entity often involving a new or the incumbent
management (Meuleman et al., 2009). PE-backed
buyouts are considered a form of entrepreneur-
ship, in which PE firms increase eciency and
eectiveness and enhance growth (Harris, Siegel
and Wright, 2005; Meuleman et al., 2009; Wright,
Hoskisson and Busenitz, 2001). Buyout deals are
Thanks to Thomas Sabel for his support in providing
access to case material. Thanks also to the editor and
reviewers for comments on earlier versions. Financial
support from Equistone PE for CMBOR is gratefully
usually portrayed as driven by rationality and
financials, yet evidence from the general takeover
market indicates that the process typically does
not involve open market competition (Boone and
Mulherin, 2007). In this vein, Arthurs and
Busenitz (2003) have called for new theoretical
approaches to advance our understanding about
the relationship between PE firms and their ac-
quisition targets. The authors assume relationship
factors such as ‘goal congruence’ and ‘trust’ to be
a promising route forfuture research (Arthurs and
Busenitz, 2003). Similarly, Graebner and Eisen-
hardt (2004) conceive acquisitions as ‘courtship’,
suggesting that corporate sellers assume an active
and influential role in transactions and their
selling decision to a large extent depends on non-
financial considerations such as the relationship
fit between deal parties.
© 2016 British Academy of Management. Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4
2DQ, UK and 350 Main Street, Malden, MA, 02148, USA.
160 O. Ahl ers et al.
Some research progress on the relational side
of deals has been made regarding family firm
sellers – they are often sellers in buyouts
(DeTienne, 2010; Niedermeyer, Jaskiewicz and
Klein, 2010; Scholes et al., 2007). Family firms
prioritize non-financial goals that help to fulfil
their need for socio-emotional wealth (SEW) (e.g.
ıa et al., 2007; Zellweger et al., 2012).
Due to SEW, family firm sellers make conscious
selection decisions about PE firms as transaction
partners, in which the relationship or aective
dimension plays a key role(Tappeiner et al., 2012).
In this regard, family sellers could constitute a
class of sellers for whom the relationship with a
potential buyer is even more important than for
non-family sellers. Sellers may be committed to a
deal with a particular PE firm, but the PE buyer
who is typically focused on financial returns needs
to perceive such commitment on the part of sellers
if they are to invest costly eort in the process.
Indeed, buyers need to perceive that the seller is
committed to selling the company. This may be
particularly critical when dealing with family firm
sellers, who might be more reluctant for emo-
tional reasons to sell the business. Although some
advances in understanding the role of relational
factors in PE buyouts have been made (De Clercq
and Sapienza, 2006; Howorth, Westhead and
Wright, 2004), we have limited knowledge about
the key construct of commitment in exchange
relationships. Commitment has a great deal of
importance in almost all business relationships
(e.g. Scheer and Stern, 1992). In particular, the
aective form of commitment, which goes beyond
‘cold’ costbenefit calculations and results in
preferences for certain exchange partners largely
independent of financial gains (Meyer, Becker and
Vandenberghe, 2004), has not been investigated in
the context of buyout deals.
Accordingly, in this paper we investigate the
relationship-side of buyout deal-making by exam-
ining whether there is more to buyoutdeal-making
than ‘hard’ financial considerations. We aim for
a number of contributions. First, we add to the
limited literature on the negotiation process in
PE firms and buyouts by hypothesizing and em-
pirically testing antecedents of buyer perceptions
of sellers’ aective deal commitment in buyouts.
Rather than simply accepting the highest price,
showing organizational rapport is an important
selection criterion for the seller side (Graebner
and Eisenhard, 2004. We shed light on this ne-
glected role of relational factors in the context
of PE and buyouts by empirically investigating
which factors foster this rapport and thus aective
deal commitment. Knowing more about these
core decision criteria might help PE firms to
outcompete their competitors in the process of ne-
gotiating new buyout deals. Second, we contribute
by arguing and showing that, notwithstanding
PE firms’ focus on generating financial returns,
understanding of the negotiation process needs to
recognize that their perceptions of aective deal
commitment are dependent on the particular type
of seller. In doing so, we add to the growing body
of literature on family firms. We investigate buyer
perceptions of whether family firms dier from
non-family firms as sellers in buyout transactions.
Thus, we provide further insights into the emerg-
ing recognition of the sale of family businesses
as an important alternative to secure family firm
survival when internal family succession is not
feasible (Scholes, Westhead and Burrows, 2008;
Wennberg et al., 2010). As such, we highlight that
selling a family firm should not be regarded as
failure but as one of many succession options.
Third, our research adds insight into the pro-
cesses through which firms are sold (Boone and
Mulherin, 2007; Graebner and Eisenhardt, 2004)
by highlighting that the process is heterogeneous
depending on the dierent parties involved in the
To reach our objectives, we use a survey-based
data set of 174 PE-backed buyouts across Europe
from 2008 to 2011. Respondents are high-profile
individuals who mostly occupy managing direc-
tor or investment director positions in PE firms.
Thus, we explicitly ask PE managers representing
the buying side for their perception of the selling
side. Additionally, we analyse case studies repre-
senting the selling side for their perception of the
PE firms to further enhance our findings.
We proceed by first outlining the theoretical
background for our considerations. In doing so,
we briefly summarize the existing literature on
commitment theory.Second, hypotheses regarding
antecedents of perceived aective commitment in
buyouts and the moderating eects of family firm
sellers are developed. Third, we describe the sam-
ple, the variables and constructs of our statistical
analysis and present our empirical results. Lastly,
we discuss our findings and acknowledge limita-
tions of our study while pointing to avenues of
future research.
© 2016 British Academy of Management.

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