Identify Best Type of Buyer
Your client’s ultimate goal is to sell his business to the right buyer—the one that will allow him to achieve the objectives he set for himself and the company. Finding that buyer begins with identifying the best type of buyer.
Your client’s M&A advisor will work with him to decide the best type or types of business buyers to approach. It is important to consider a broad range of buyers both from within your client’s industry and without because the most obvious choices are not always those who will see the most value in the business.
For your own information, there are three different types of business buyers:
1 Strategic Buyers
Strategic buyers are companies that could benefit from synergies by taking over an operation. These business buyers look for companies that fit their strategic plans. They include suppliers, customers, and possibly competitors, as well as companies in other industries that could benefit from access to a new market.
2 Financial Buyers
Financial buyers are groups such as private equity companies and pension funds that make acquisitions as investments. Some buy businesses that they can improve and sell for a profit. Others are called long-term holders; they prefer to keep the businesses in their portfolios.
3 Individual Buyers
Individual buyers are individuals who want a company to run or to oversee as an investment. These buyers are rare in M&A transactions; they are more common in small business purchases.