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Opening the Black Box: Power in Buyout Negotiations and the Moderating Role of Private Equity Specialization

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  • Oliver Ahlers
  • Andreas Hack
  • Franz Kellermanns
  • Mike Wright

Abstract

The management buyout is an important exit strategy for small business owners. Negotiations of buyout deals have received little research attention to date. This is surprising given buyout negotiations' complexity giving rise to multiple issues that require consideration and often conflicting interests of deal parties. This paper examines perceived bargaining power in buyout negotiations between private equity (PE) firms and current owners who sell their business. We identify competition, expertise, and time pressure as key antecedents of PE firms’ perceived bargaining power and examine the moderating effect of PE firms' industry and size specialization in buyout negotiations. We use a sample of 176 respondents who each report on a particular buyout deal for a PE firm. The majority of respondents are seasoned PE professionals who held managing director or investment director positions.

Suggested Citation

  • Oliver Ahlers & Andreas Hack & Franz Kellermanns & Mike Wright, 2016. "Opening the Black Box: Power in Buyout Negotiations and the Moderating Role of Private Equity Specialization," Journal of Small Business Management, Taylor & Francis Journals, vol. 54(4), pages 1171-1192, October.
    • Handle: RePEc:taf:ujbmxx:v:54:y:2016:i:4:p:1171-1192
    DOI: 10.1111/jsbm.12235
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    Cited by:

    1. Alexandra Bertschi-Michel & Philipp Sieger & Thomas Wittig & Andreas Hack, 2023. "Sacrifice, Protect, and Hope for the Best: Family Ownership, Turnaround Moves, and Crisis Survival," Entrepreneurship Theory and Practice, , vol. 47(4), pages 1132-1168, July.
    2. Hammer, Benjamin & Marcotty-Dehm, Nikolaus & Schweizer, Denis & Schwetzler, Bernhard, 2022. "Pricing and value creation in private equity-backed buy-and-build strategies," Journal of Corporate Finance, Elsevier, vol. 77(C).
    3. Martin Tao-Schuchardt & Frederik J. Riar & Nadine Kammerlander, 2023. "Family Firm Value in the Acquisition Context: A Signaling Theory Perspective," Entrepreneurship Theory and Practice, , vol. 47(4), pages 1200-1232, July.

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