Contested takeovers of family firms and socioemotional wealth: a case study

The purpose of this paper is to provide an understanding of the importance of socioemotional wealth (SEW) to family firms in Poland viewed through the lens of the events surrounding the first hostile takeover bid of the post-communist era on the Warsaw Stock Exchange when the clothing company Vistula & Wólczanka (V&W) made an unsolicited, leveraged bid for the family-controlled jewelry company W. Kruk.

The 2008 takeover and its aftermath are described in the context of the corporate governance and legal environment in Poland. The case study events demonstrate the connection between firm behavior and SEW theory.

After the acquisition of W. Kruk by V&W, the Kruk family purchased stock in the newly named Vistula Group and gained influence over the supervisory board in concert with a business ally, eventually wresting back control of the company in the style of a Pac-Man “defense.” The case study illustrates the importance of SEW in family firm takeovers.

The case study design has limitations for generalizability. Nevertheless the research highlights the important role of SEW preservation in understanding the market for corporate control of listed family firms in Poland.

Understanding the reaction by family firms to takeover bids requires recognition that there is a tradeoff between financial and SEW considerations, not just financial gains and losses.

The case study demonstrates the importance of SEW to family firms and suggests that the balance of power in takeovers on the Polish stock market rests with incumbent management.