Strategic Buyers vs. Financial Buyers

In our last post, we mentioned that different buyers have different motivations. In most cases, buyers fall into two main categories: strategic buyers and financial buyers. In order to show them the value of your business, you need to know why they make their decisions.

Strategic Buyers

Of course, each individual buyer will have their own unique motivations. But, when it comes to strategic buyers, there are some common ideas that guide their choices.

First, strategic buyers want seamless integration. They may not necessarily have the same products or services, but they’re looking for synergy.

When a strategic buyer evaluates a business, they often ask questions like these:

• Are my customers already shopping for these products?
• Will acquiring this business allow me to reach a different market?
• Does acquiring this business give me access to trade secrets I want, or want to prevent competitors from having?

Typically, strategic buyers will know a lot about your industry and its current trends. As a result, they’re likely to be more concerned about how your business fits into their larger strategy. For strategic buyers, it’s all about adding value to their corporation and its strategy.

Financial Buyers

Financial buyers are quite different from strategic buyers. Unlike their counterparts, financial buyers are typically looking for stand-alone opportunities instead of overall synergy. As a result, they’re more inclined to ask questions like these:

• Does this business have the potential for sustainable economic growth?
• Does this business have competitive advantages that will last over the long term?
• Can I expect a return on investment with a sale or an IPO later on?

Unlike strategic buyers, who probably already know the ins and outs of your industry, financial buyers will conduct a highly-detailed analysis of your industry as a whole. From there, they often choose to examine how your business fits into the broader scope of your industry, and decide if there is enough potential for them to make an investment. In this case, there’s less focus on corporate strategy. Instead, financial buyers want to focus on expanding a business’ value for the sake of an ROI later on.

What Buyers Does Your Business Attract?

Depending on how you market your business, it may very well attract financial and strategic buyers. If you’re not sure how to proceed, or how to market to certain potential buyers, contact us. Our business brokers are experts at marketing your business to draw in interested parties – we handle negotiations, too! For more information about selling your business with us, click here.