The effect of acquisition motives on M&A performance. Evidence from German family and non-family firms

Purpose This paper aims to examine the effect of family ownership on takeover motives and merger and acquisition (M&A) performance. Design/methodology/approach The study combines literature on mixed gambles and agency relationships within family firms to suggest that family firms are more (less) likely to engage in deals motivated by synergies (agency or hubris). Concurrently, family shareholders ensure that family-specific benefits outweigh family-specific costs of M&A during the transaction process. Consequently, family firms are better acquirers. To test our reasoning, 408 representatives of German family firms and non-family firms are asked to rate the pre-deal motives and post-deal performance of their companies’ latest acquisitions based on various (non-)financial criteria. Findings We find that synergies (agency or hubris) as an acquisition motive are more (less) relevant for family-owned businesses. Deal performance of family firms exceeds that of non-family firms. A positive (negative) and significant effect of synergies (agency or hubris) on deal performance is found for both types of businesses; however, the effect of synergies (agency or hubris) is stronger for family companies (non-family companies). Originality/value This paper links the controversial question of whether family businesses are better buyers to the question of why they get involved in takeovers. In developing an explanatory approach, it draws on an alternative theoretical model (mixed gambles). Moreover, the study introduces a new data source for pre-deal motives and post-deal outcomes and widens the scope of research on family firm acquisitions to the German economy.