Buyer Types

The strategic buyer is one engaged in a similar or related business to the one being purchased. Generally, the strategic buyer is willing to pay the highest price since it provides a quick entry to a related business. Buying a business is much easier than trying to replicate it.

The competitive buyer offers a lot of synergies that can reduce costs and perhaps increase market share - which also obviously reduces competition. However, this is a less popular type of buyer because sellers are usually reluctant to approach the competition.

The financial buyer brings little, if any, synergy to the deal. However, these buyers do bring financial knowledge and use it to increase the profits of the business. They generally make changes and work to increase the value in order to sell it at a profit in five to seven years. The financial buyer almost always insists on owning 100 percent of the acquired business.

The overseas buyer can be difficult to find, and usually wants to acquire larger companies. This type may look at a smaller firm if they feel that it provides an entry to the U.S. market, and will pay well for such a company.

A customer, vendor or supplier is also a possible acquirer, but vertical integration is not perceived as a viable acquisition strategy today.

Copyright 2007 Business Brokerage Press