Search results

The primary purpose of this chapter is to provide insight as to why some privately held small-to-medium sized firms (SMEs) have been able to outperform their peers in terms of their performance defined as revenue growth, profit growth, growth in number of employees and markets. Little is known about privately held firms and what drives their performance. The second purpose is to synthesize and provide clarity to the extant literature on rapid-growth SMEs (gazelles). The third purpose is to bring a unifying theoretical lens to the literature.

The research was conducted using elite interviews with 47 informants drawn from 21 rapid-growth, private companies. Qualitative methods were used to identify themes related to the strategies used by these firms to outperform their peers over a five-year period.

The study organizes and summarizes the extant literature on rapid-growth companies, provides support for some findings, and clarifies equivocal findings. It also suggests that early strategic choices made by the owners of private firms along with their attitudes and capabilities positioned the private firms for rapid growth. The Morgan and Hunt (1994) trust–commitment theory of relationship marketing emerged from the data as the model used most often by rapid-growth private firms and the one that best integrates the factors driving private firm performance. A modified, two-stage model appears to be warranted. The first stage focuses on respect for the value employees bring, and building their trust and commitment is an essential first step that subsequently drives the second stage of the model – building customer trust and commitment. While some of the outcomes are similar to those suggested by Morgan and Hunt, new outcomes (collaborative innovation, citizenship behaviors, sustained growth, and premium prices) also emerged as important outcomes in this study.

This study provides owners of private firms with insight on how to build and grow their firms in a rapid and sustainable fashion.

Little research has been undertaken on private firms. This study addresses this knowledge gap. The modified trust–commitment relationship marketing model that emerged from the data had not been utilized to date in the field of rapid-growth firms and it provides an integrating theory that explains the performance of rapid-growth private firms.

The purpose of this article is to provide a practical overview of the personal liabilities (criminal, civil and other) that a governor of a French company may incur, to consider the chances that a corporate governor will actually incur personal liability, and to explain the forms of protection available.

This article is based on an analysis of French legal provisions and case law, as well as on both French and English‐language commentary. It is written from the perspective of a governor of a French company and, especially, of a privately‐held French subsidiary of a foreign parent. This article analyzes in a general manner the entire spectrum of possible liabilities that a corporate governor may incur.

There exist particularities of French law which often come as a surprise to foreigners. The corporate governors involved in an LBO of a French target must structure the acquisition carefully in order to avoid violating French criminal law. There has been an increasing trend in France to make corporate governors accountable, and French case law is full of examples of corporate governors being held liable by reason of their position, on the basis of many types of violations. A corporate governor may be at least partially protected from personal liability with insurance, with increased cash compensation, and/or with one or more delegations of powers.

Enables both foreign multinationals and those they appoint to positions of governance of French companies to obtain a full understanding of the legal issues involved.

First English‐language analysis of the legal issues involved in serving as a governor of a French company, from the perspective of a governor. This article is useful for both foreign parent companies who seek to fill a position of corporate governance of their French subsidiaries, and those who contemplate filling such a position.

The authors aim to measure the value of leasing, versus owning, business locations for the closely-held firm.

The authors examine the sales transactions of small businesses in the USA – those with revenues of less than $20 million per year – between 1995 and 2010. The authors contrast the values of firms that own, and do not own, their real estate.

In general, the authors find negative relationships between closely-held firm values and real estate ownership. Nowhere did the authors observe firm value being enhanced by property ownership.

The data set may be limited by the accuracy of the data provided by business brokers. Compared to the capital markets, the small business “exchange” is less efficient, but it is the only source of unlisted business sales data.

The findings are important to the small-business broker and the investor. The broker might better advise the buyer and seller with the findings. Business owners, private equity investors, and their advisors, are all reminded to focus on the core business strategy and avoid getting “locked into” real estate ownership in a business investment.

The impact of real estate on the valuations of closely-held firms is a largely unexamined area. And there is a lack of consistency on publicly-held company valuations as a function of real estate ownership; these public company findings and the dearth of work on the privately-held company's real estate attract the attention in this study.

This paper aims to analyze the contribution of the external director to the governance of family businesses (FBs) in different generations. The authors aim to support the literature regarding the heterogeneity of these companies, showing that the generation of the primary decision-maker is an essential factor that differentiates the FBs from each other. These differences have numerous impacts in governance structures as boards' role and composition.

The authors hypothesized that the main contribution of external directors to FB controlled by family members of the first generation is to provide resources to the company's survival. As it evolves and the later generations begin to participate as owners and managers, dealing with specific agency problems associated with this type of organization becomes essential. Four activities found in literature were tested: control of parental altruism and intrafamily divergences and provision of resources and external relations. Quantile regression (QR) was applied based on the dependent variables' characteristics, which show a strongly asymmetric distribution for all the models proposed.

The QR techniques and ordinary least squares (OLS) showed statistically significant results for the agency's activities when comparing the first and the second generations. The contribution of the external director in this context is to overcome the challenges associated with the beginning of sharing ownership and management. The resource provision and the establishment of the relations proved to be more critical in third-generation FBs. At this stage, the directors provide the needed resources for these companies' survival in an increasingly dynamic and complex environment.

Among this work's limitations, the authors highlight the lack of a variable that captures the life cycle in which the company is. They believe that the inclusion of this control factor would bring more robust results to the analysis. Besides, they point to the condensation of the countless activities performed by external directors to just four. This generalization fails to capture the other duties and contributions of this director in the family organizational environment.

This study aims to provide guidelines so that external directors of FBs understand more clearly the needs of the companies in which they operate, whether from the first, second or third generation onward. The contribution of this director may be different for each type of organization. By understanding the weaknesses and concerns inherent to each generational stage, the external director can focus his efforts on adopting actions that effectively contribute to organizational performance.

In Brazil, most studies focus on the effects of board's composition and structure on financial results. In these papers, the data is usually secondary, found on companies' websites. The authors step further in this paper by analyzing primary data from privately held companies, which in Brazil is challenging to access. So, they believe they are surpassing the analysis traditionally found in the literature on the composition of boards of directors in terms of scope and methodology.

The purpose of this paper is to discuss the questions arising from the use of discounted cash flow (DCF) method in the context of the valuation of a Portuguese subsidiary of a German firm. The process ended up in courts. Expert valuation was called. Two points are of particular relevance. First, given the past performance of the company and the external environment it faced, what would be a reasonable growth rate for free cash flow in the residual value period. Second, what questions arise form the assumption of seeing the subsidiary as a going concern, given that the German parent company had been opening new factories in India, China, Romania and Slovakia, and its presence in Portugal was far from guaranteed.

The paper is based on case study which rests on a real legal and financial business situation. The case is used to illustrate the conceptual questions related to the use of the DCF method in valuing closely held firms, particularly the very significant impact of terminal value in the process of equity valuation.

It was found that very small variations in the growth rate assumed for the residual value period make a great difference in share valuation. Thus, the work of experts had to be very finely balanced, and the judge, when deciding on the fair value to be paid to the plaintiff based on expert opinion, should give careful consideration to scenarios.

A relevant point of the paper is to highlight the effect on business valuation of potential growth rates forecasted for the perpetual growth phase. That rate is, in this case influenced by eventual location changes that can result from globalization of industrial activity. Portuguese shareholders in foreign controlled joint ventures, and all the other stakeholders are facing important challenges from a new world economic order, and this case clearly illustrates some characteristics of this trend.

The paper is useful for managers that deal with business valuation cases that end in courts, by highlighting cash flow based methods and its central assumptions, and exploring critical areas that influence the final outcome of a lawsuit that is based on differences of hypothesis used in financial forecasting.

Today the governance and management structure of business organizations, particularly publicly traded corporations uti lizes a board of directors. Organization use of boards of directors is considered an openly accepted and utilized structure to provide leadership and management direction in business organization. Because large public companies recognize the value to the corporation and because of the increased regulatory requirements placed on publicly traded companies, the use of boards of directors are strongly endorsed. For small businesses and privately held companies, however, a board of directors is not always viewed as a useful part of the corporate structure. This paper reports on the results of a study which focused on the board functions and operations of small privately held corporations. A survey of 180 small, of ten family owned, non‐public corporations was conducted in one Mid western state. The study corroborated the expanding body of literature suggesting the lack of formality in board functions for small privately held companies. Critical factors influencing board function and action included needs of the company, abilities of the directors, sophistication of ownership and management, as well as life cycle stage, percent of family ownership and trading status of the corporation’s stock.

This empirical research paper draws evidence from a database of UK independent private companies (n=250) and reports on the financial aspirations of owner‐managers of family firms with respect to the flotation route. Following a brief review of the literature, the paper proceeds with an introduction of the UK survey into the financial development of private SMEs. Then evidence is presented on the perceived factors that influence the decision of owner/directors of family companies to consider the flotation option. Phase A employs univariate statistical analysis to contrast financial philosophies of the owner‐managing directors (OMDs) of family firms against those of their mainstream private counterparts. Phase B employs cluster analysis to categorise sample family companies into four generic groups that evidently highlight that the PLC route is not always tailored to financial issues. The empirical results demonstrate that the financial strategies of family companies are more or less in line with the behavioural issues shaping all private companies irrespective of family control. Finally, the paper concludes with a set of tentative policy implications. To encourage the public equity development of smaller privately held companies, particularly family firms, there is scope for more policy initiatives that are tuned to the “socio‐behavioural‐cultural” ethos of private‐OMDs as they master their corporate and entrepreneurial odyssey.

The political behavior of founders, families and their firms in the form of campaign contributions has not been explored by family business scholars. Yet partisan and ideological campaign contributions raise a range of governance issues and hold implications for myriad stakeholders, including investors, employees, customers and the public. The purpose of this paper compares and contrasts the campaign contributions of founder- and family-controlled firms relative to managerially governed firms and develops theoretical explanations for observed differences.

This paper develops a “principal owner” hypothesis based upon a typology of firm ownership characteristics (founder/family control or not; publicly traded or privately held). This hypothesis is tested by multivariate empirical analyses of the campaign contributions of 251 firms across 14 industries with four types of ownership structures.

Founder- and family-controlled firms are more partisan and ideological relative to other firms in their industry and this finding is consistent across industries. Founders and family members influence political behavior, including in publicly traded firms.

Given potential controversies raised by ideological and partisan campaign contributions and the unpredictable returns on political investment, it behooves founders and their family members to assess the impact of their political behavior on the business and on key stakeholders.

This paper is the first to raise governance issues related to founders’ and families’ political spending and develops original insights into the ideological and political behavior of these businesses.

The purpose of this study is to focus on mutual funds’ valuations of their US private firm holdings. According to extant academic literature, mutual funds’ boards of directors should assign prices to their private firm stocks based on their own determination of fair value.

This study investigates fluctuations in valuations of mutual funds holdings of private firms, and whether or not mutual funds managers are able to pick privately held firms that eventually undergo an initial public offer.

The study shows that private firm common stocks’ prices fluctuate much more than preferred stocks’; however, as expected, preferred stock is the most selected security type. This study also investigates these firms’ propensity to undergo an initial public offering (IPO). Results show that mutual funds allocated most of their capital to US private sector firms that underwent an initial public offering. Logit model results reveal that fund managers are able to pick privately held firms that will go public.

Due to data limitations, the authors’ analysis does not control for venture capital ownership; an issue the authors plan to address in the future.

Though, research in this area may exist, the authors have not found academic literature related to holdings of private firms by mutual funds, pricing by funds’ boards of directors or the motives for such investments.

To review the M&A Brokers “no-action” letter issued in February 2014 by the staff of the USA Securities and Exchange Commission that clarifies the circumstances in which intermediaries (M&A brokers) may receive transaction-based compensation for services provided in connection with sales of private companies without having to register and be regulated by the SEC as broker-dealers under the USA Securities Exchange Act of 1934.

Examines the new SEC staff interpretative guidance on activities of M&A brokers in light of USA federal securities laws and previous staff no-action letters that address the application of broker-dealer registration requirements to such intermediaries when they render services in connection with purchases and sales of privately-held companies. Summarizes the manner in which the SEC staff’s new position expands the types of private M&A transactions on which intermediaries may advise and broadens the scope of services they may provide without subjecting themselves to Exchange Act registration.

The M&A Brokers letter dispels much of the uncertainty existing under earlier SEC staff no-action letters about the scope of permissible activities in which unregistered intermediaries may engage in private M&A transactions. By broadening the scope of those activities under the federal statutory regime governing broker-dealers, the new staff guidance should facilitate the expansion of services provided by M&A brokers without registration and permit greater flexibility for M&A brokers and their clients to structure compensation arrangements. The paper cautions that, absent reform of more restrictive regulation under the securities laws of some states, the prospects for expanded involvement by unregistered intermediaries in private M&A transactions may not be fully realized.

Expert guidance from experienced securities lawyers.