The Coming Wave of Business Succession: The Role of Private Equity and Stakeholder Theory

Abstract

Retiring business owners are expected to sell or bequeath $10T worth of assets over the next twenty years. Small businesses will drive this coming wave of succession. While stakeholder theory has generally been rejected in finance due to the lack of accountability it creates for managers, it may be that entrepreneurs derive utility from positive outcomes for other stakeholders. To this end, we extend the stakeholder synergy theory to the case of business succession and generate recommendations for selling business owners based on what they value. Our theoretical extension has implications for selling business owners and the related ecosystem that support and are impacted by such deals, including: communities, employees, and private equity firms. We provide a case study to exemplify the issues faced by exiting business owners selling to non-family.