Title: The value of financial freedom and ownership in opportunities of entrepreneurial harvest

Authors: Joao C. Neves

Addresses: ISEG School of Economics and Management, Technical University of Lisbon and HEC School of Management, Paris, France Rua Miguel Lupi, 20 (Office 109), 1249-078 Lisboa, Portugal

Abstract: Mergers and acquisitions can play a key role in consolidation of highly fragmented industries and in a company|s on-going growth. From the entrepreneur|s point of view, merging with a larger company or being acquired makes perfect sense when he finds it is the appropriate timing for capturing the value that has been created through the venture. This paper argues that the financial freedom of the entrepreneur and the non-existence of agency problems between managers and owners which reduce the myopic short times bias of managers are sources of value not reflected in the financial statements. The evidence is presented using the case study methodology in 12 opportunities of entrepreneurial harvest. Consequently, the study calls the attention of users of financial information to the dangers of traditional financial analysis and valuation methods without a deep understanding of the economic grounds of the entrepreneurial firm analysed.

Keywords: entrepreneurship; entrepreneurial finance; mergers and acquisitions; small business valuation; due diligence; small businesses; small firms; financial freedom; ownership; financial analysis; market value.

DOI: 10.1504/IJEIM.2005.007000

International Journal of Entrepreneurship and Innovation Management, 2005 Vol.5 No.5/6, pp.469 - 482

Published online: 02 May 2005 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article