Private equity

This entry explores private equity investments in family firms. While these investments are relatively rare among family firms, their impact can be positive. Two types of private equity investments are discussed namely development/growth capital and management buy-outs. In the case of development/growth capital private equity can help family firms to grow, and even to focus their business by reducing the number of family owners. In terms of management buy-outs, private equity enables the non-family management team to buy the business from the family, and in doing so to subsequently maintain something of a ‘family’ culture post buy-out. Despite some of these potential advantages, family businesses may be reluctant to accept private equity investments primarily because they will lose some equity and therefore control. Many questions on this topic still remain unanswered so some suggestions for future research are included in the conclusion.