Using social identity theory, we examine how the identity of the target firm in a family firm-led merger impacts the merged entity’s subsequent performance. We compare family firms’ target preferences and postmerger performance to those of non-family firms, and find that not only are family firms more likely to prefer other family firms as merger partners, but also achieve better post-merger outcomes with them. We test our hypotheses using a large sample of Swedish private firms, which largely controls for national cultural differences. After controlling for endogeneity and self-selection bias, our results support all our hypotheses.