Private Equity Minority Investments - Universität St.Gallen

Chapter II: Theoretical Foundationsas ‰ of GDP15.0‰12.5‰10.0‰7.5‰5.0‰11.2‰8.9‰4.0‰3.0‰2.0‰1.0‰0‰3.6‰3.7‰2.8‰2.9‰2.0‰1.2‰0.9‰2004 2005 2006 2007 2008 2009 20102.5‰3.7‰ 3.1‰ 3.1‰ 3.0‰ 2.3‰ 2.3‰ 2.2‰ 2.0‰ 1.9‰ 1.9‰ 1.5‰ 1.4‰ 1.2‰0‰United KingdomSwedenSwitzerlandEuropeNorwayFranceFinlandSpainNetherlandsLuxembourgGermanyDenmarkPolandBelgiumPortugalFigure 7: Private equity investments as per mil of GDP 90 (Source: EVCAYearbook 2010)2 Family Firms2.1 TermDespite a considerable amount of literature on family firms, there is nouniversal definition of the term, reflecting the diversity of companies thatare seen as family firms. 91 The existing definitions reflect one or more offour components: (i) the percentage of the owner family’s equity stake inthe company, 92 (ii) the extent of de facto control of corporate decisionmaking signified by management positions and/or board seats held by90Based on private equity investments in the respective country, industry statistics.91For further references, see LE BRETON-MILLER/MILLER, p. 1170; KLÖCKNER, p. 14;ASTRACHAN/SHANKER, p. 211 et seqq.; FLÖREN, p. 15. The lack of a broadly used, consistentdefinition of family firms is not without problems. Cf. WESTHEAD/COWLING/STOREY cited inKLÖCKNER, p. 14, FN 48 (vividly demonstrating the extent of definitional confusion byshowing that the share of family firms in their sample varied between 15% and 81%depending on the definition used). For a broad overview of the various definitions used in theliterature, see NEUBAUER/LANK, p. 21 and KLÖCKNER, p. 16. Also cf. ASTRACHAN/KLEIN/SMYRNIOS, p. 45 et seqq. (choosing, as a response to the vast heterogeneity of familybusinesses, not to provide a precise definition of the term, but instead develop a familypower,experience, and culture (F-PEC) index as a standardized instrument to assess familyinfluence on the family firm in the dimensions of power, experience, and culture).92E.g., FLÖREN, p. 25 (qualifying a company as a family business if a family or a founder holdsan equity stake in excess of 50%, used as one of several criteria); see also the definition offamily firms of the Institut für Mittelstandsforschung Bonn, www.ifm-bonn.org; GIGER et al.,p. 10; EHRHARDT/NOWAK, p. 17 (qualifying a business as family-owned, “if one or moreindividual members of one or two families (together) own a fraction of the equity of at least75 percent”).23