Influence of Family Ownership on the Industry-Diversifying Nature of a Firm's M&A Strategy : Empirical Evidence from Continental Europe

We investigate how family ownership influences the industry-diversifying nature of M&As by listed companies in Continental Europe and the corresponding shareholder value effects at deal announcement. For a large sample of 3,485 M&As during 2005–2013, we observe that acquirers having a family as the largest shareholder are less inclined to take over an unrelated target firm than lone-founder and other types of non-family firms. However, as the size of the family ownership stake increases, family firms become more eager to follow an industry-diversifying M&A strategy. While industry-diversifying M&As are associated with lower abnormal returns for acquirer shareholders on average, we also observe that family ownership fully reverses this negative effect. We therefore conclude that those unrelated M&As, although still representing a conflict of interest with the family firm's minority investors, do not destroy shareholder value on average