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Family Business and Exit Strategies:

an Empirical Research

Ugo Lassini Bocconi University - Strategic and Entrepreneurial Management Department V.le Isonzo, 23 20135, Milan, Italy Tel: +39.02.58362520 Fax: +39.02.58362530

Key Words : family business, survival, succession, sale

Intended Target Journal / Conference: Entrepreneurship Theory and Practice; Family Business Review / AoM; Workshop on Family Firm Management Research (Jonkoping); FBN-IFERA



The literature on family business has generally devoted great effort to studying problems arising

from succession processes, actors involved, their effects on firm performance and the ways of

managing processes. However, empirical evidence shows that, in most countries, family businesses

are not likely to survive after the third generation. Statistics prove the difficulty to accomplish a

successful succession: only nearly 25-30% of family businesses successfully hand over leadership

on to the second generation and only 10-12% on to the third one (Beckhard e Dyer, 1983; Murray,

1999; Pellegrin, J. 1999). Moreover, only nearly 2-3% manage to go in for permanent development,

whereas most of the m go not beyond the third generation and either close down or are sold.

Nevertheless, the literature of concern has never investigated the sale of family businesses nor

empirical researches do exist. The rate of survival generally depends on the success of the

succession process: the situations leading to wound up are not so clearly distinguished from those in

which the firms are sold. If a firm closes, it is a failure, but we are not able to express such a clear

judgement in case of trade sale: is it due to the failure of the succession process? What happens to

the family who sold the business? And what happens to the business that has been sold? The

decision to sell the business greatly impact on the company itself, on its economic purpose,

management and work force in general. In particular for family businesses, it is a very complex

decision to make implying numerous economic variables arising from highly diversified aspects not

only merely economic. Emotional aspects have often a strong impact: the firm decisional core in














The main purpose of this research is to identify the motivations underlying the decision to sell the

family business and to understand what happens to the entrepreneurial family after the sale.



The empirical analysis was carried out on a sample of Italian family businesses 1 active in some

sections of the following industries: instrumental and sundry mechanics and electro- mechanics that

were sold 2 between 1990 and 2000. The method applied also implied the use, jointly or additionally,

of questionnaires and cases.

First of all, a macro population of reference was identified in the body of companies sold in Italy in

the mecha nic industry between 1990 and 2000. Such identification was carried out by way of a

cross-analysis of some reports on M&A occurred in Italy (Kpmg Consulting 1989, 2001). The

analysis of all sales prior to 2000 determined the period of reference, meant to understand the

related consequences over a couple or years, to prevent any record failure of the main actors

involved in the transfer process.

We then proceeded to identify a sample of Italian family businesses sold between 1990 and 2000

working in the mechanics industry that well mirrored the main features of the population of

reference. We carried out 32 interviews to both sector experts and to representatives of Industrial

and Industry Associations that enabled the identification of 237 disposed of family businesses.

We then collected some data on the sample of businesses identified by way of questionnaires

submitted to both purchasers and vendors. For every business sold, we collected the data concerning

structural and descriptive variables of both the acquired business and qualitative variables of the

purchaser in terms of reasons of the sale/purchase and about the economical and financial situation

of the business following the sale. The questionnaires have therefore enabled the identification of

the features of the sold businesses and of the purchased ones, of the reasons behind sales (from both

the seller and the purchaser’s points of view), to analyse the reasons of the acquisition and the

results achieved after the sale (not the precise purpose of the present research).

1 In this research, family businesses are those firms (of small, medium or large size) controlled by one or more owners reciprocally related by family ties and kinship. 2 The sale of a family business implies the family transfer of control over a new entrepreneurial group by selling, either the majority or part of the firm or some shares.


The 68% of questionnaires were returned (163 businesses), a rate high enough not to invalidate the

sampling method (also holding the situation of the industry of concern and the year of occurrence).

Also the theme of the reasons underlying both sales and purchases emerged during the 32

interviews to the industry experts, on the basis of the information they acknowledged so improving

the intrinsic value of the research by getting from a triple source of data.

Preliminary Results

The samp le of reference shows prevalence of family businesses (nearly 60-65%) small and medium

sized where one or few family shareholders control the risk capital and are directly involved in the

governance and management boards whose members are hardly ever non- family members. It also

includes family businesses where a certain number of family members control the share capital

(over 5-6 people): these are medium/big sized businesses with both family and non- family members

in the Board of Directors and all other bodies. Nevertheless, present development conditions

strongly dependent on the families, as they hold shareholding sufficient to economically control the

company. Moreover, the typical profile of the sampled businesses is of some interests in terms of

number of generations succeeded in either the ownership or the management of the sold business. In

particular, we notice prevalence of ownership quite exclusively concentrated in the first generation

and, at the same time, the management is appointed to both the first and second generation. Finally,

we observed the temporal gap between establishment and sale: the latter never occurs during the

first 5 years of the business life and in a few cases during the first 15 years, whereas lots of

businesses are sold 30-35 years after foundation.

The empirical research carried out shows that there is a broad range of reasons underlying the

decision to sell, which can be grouped into three different categories: 1) strategic motivations

(technological obsolescence and need of constant investments; inadequate size to work within the

industry; inadequate profitability compared to the ownership’s expectations; difficulty to attract

skilled human resources, financial motivations and personal motivations); 2) financial motivations


(maximization of the transfer price following an advantageous offer; business financial need losses

that cannot be settled; family financial need) and 3) personal motivations (heirs indifferent or

unable; disagreement among partners; lack of heirs; intention to start a new activity; decrease of

passion; conflicts with trade unions).The research shows also that the third group of motivations

(which reflects problems arising from the succession process) was the main reason just in 30% of

the cases. Due to the different nature of the underlying motivations, selling turns out a valid

alternative to grant the business continuity (and the brand’s that often coincides with the family

name). It indeed does not mark the very end of the entrepreneurial venture, nor is the consequence

of a failed succession.

In the research branch of the family business, succession needs to be distinguished between

entrepreneurial succession of the family and life of the family business. A detailed analysis of both

the future of the fa mily who sold the business and the economical/competitive results achieved

under the new ownership is needed.

This research shows that: a) there is no strong evidence that the family who sold the business starts

a new business after the sale and b) that the firm sold gains better performance if at least one

member of the former property keeps a role of minority shareholders and/or remains actively

involved (either temporarily or permanently) in the governance or the management of the firm after

the sale.