Selling Your Business – To Whom?

Business Exit 14th July 2019 99 Comments

Selling Your Business – To Whom?

If you are looking to sell your business, you should realise who is the potential buyer. Is it a strategic buyer or a financial buyer.

Strategic buyer’s interest in acquiring your company may include vertical expansion (toward the customer or supplier), or horizontal expansion (into new geographic markets or product lines). They might be willing to pay a higher price for your business as they will obtain synergistic benefits. The other advantage for the strategic buyer will be becoming a larger company, which means, better access to capital. Strategic buyers often offer stock, cash, or a combination of the two in payment of the purchase price.

Financial buyers whereas can be classified as investors purely looking for the return. They are interested in the cash flow generated by a business and the future exit opportunities from the business. They are typically willing to look at many different types of businesses or industries. Financial buyers will carefully scrutinise the financial statements of the company. The transactions of financial buyers are often leveraged (even 80% or more debt to finance an acquisition). They are buying exactly what the company has to offer at the time of the acquisition, not willing to pay for the potential.

Marek Niedzwiedz