Mergers & Acquisitions of Family-controlled firms. Why do family businesses tend to merge less? Is it a cultural issue?

Abstract

Why is a family-controlled firm less likely to perform an M&A? What are the motives behind this decision? Is it a matter of culture? These are just some of the questions this work will try answer to. This research study examines mergers and acquisitions (M&A) in family firms, with a particular emphasis on why family firms have less propensity to pursue a transaction compared to non-family-owned businesses. It is divided into six chapters, through which the author tries to analyze the main motives for not pursuing an M&A, with a particular focus on the cultural fit. The first one, “Literature Review”, aims to briefly describe and examine the latest trends and advancements in M&A activities in general, as well as the current studies on the motives for the transactions. The paper continues with an overview of the current motives for a family business to perform an M&A operation, that has already been studied. The second chapter will start with a general definition of M&A and eventually will give the author some ideas of the most significant classifications of the transactions. Then a brief paragraph will introduce the reader to the possible future evolutions. The third chapter is about family businesses. After the description, the author will describe a future outlook for family-owned businesses. Then, the fourth chapter is dedicated to the author’s hypothesis regarding why family-owned businesses are less likely to pursue M&As. The hypothesis examines the motives that “push” M&A operations in family companies and dives deeply into the cultural matter of the businesses. The fifth chapter has the objective to find some commonalities or differences with the hypothesis from the former chapter. After having explained the methodology of the research, two case studies will be analyzed: the merger of Arcelor and Mittal Steel Company that has created ArcelorMittal, as well as the merger between Dell and EMC Corporation that has given life to Dell Technologies. The report ends with the final considerations of the author that will summarize the key findings, advising family companies that plan to consider M&As. Overall the report aims to give a complete panoramic view of the motives that push a family business to pursue an M&A and to analyze the role of the culture in two different transactions. Moreover, in the research project, the author will guide the reader into the immense field of mergers and acquisitions analyzing both the advantages and drawbacks of pursuing an M&A together with an overview of the family-business world.