What types of buyers are there?
We normally divide buyers into two categories – strategic and financial. Strategic buyers are companies that can derive operational benefits from owning the business. This can occur because of potentially higher revenues from a combination, potentially lower expenses by joining together, or a mixture of the two. Because of these perceived synergies, premium prices are often paid by strategic buyers. Financial buyers are more concerned with the return they can earn from the acquisition rather that the business in which the seller operates. Financial buyers are usually more flexible on providing management incentives, including partial ownership. There is a vast pool of money looking for middle market acquisitions among financial buyers. Which buyers are approached is determined largely by the personal and business objectives of the selling stockholders.
