Differentiating between financial and strategic buyers

What is the difference between financial and strategic business buyers? It’s a question we’re frequently asked, and understanding the difference can help you understand the goals and objectives of different potential acquirers.

Financial Buyers

Financial buyers can include Private Equity (PE) firms, family investment offices and high net worth individuals. For financial buyers, investment is their game, and accordingly they generally seek companies with attractive growth prospects, or businesses where an injection of capital could allow a quick increase to your business’ long-term value.

Strategic Buyers

Strategic buyers are normally competitors or businesses up or down your supply chain. They are normally looking to generate strategic advantages from their acquisition, which may come from the chance to cross-sell complimentary products to your customers, access talent in your executive ranks (sometimes referred to as acquihire), eliminate you as a competitor, or access new geographical markets. Clearly, the end goal of a strategic acquirer is not only to generate stand-alone value from their investment, but also to gain benefits for their own company’s long-term performance and value.

Given their different goals and objectives, financial and strategic buyers will normally approach any potential acquisition with differing criteria and priorities. Because of this, it is important to seek advice when determining how best to negotiate with either party.

If you are seeking a professional advisor to assist you with the merger, acquisition or divestment of a medium-sized business please contact Quinn M & A on 02 9223 9166 or email [email protected] to find our nearest office.