Fall 2014 issue of Horizons

PRIVATE EQUITY

Strategic Buyers and Financial Buyers: One Size Does Not Fit All by Jeff Sackman, CPA

P reparing to sell your business is a decision that can bring about both anxiety and excitement. And the selling process itself can be stressful, in many ways rekindling emotions similar to those you encountered when first starting your business. For many business owners, educating oneself on the universe of potential buyers is a daunting task with no clear starting point. One of the first things to consider when you have decided to sell is to decide on who is the likely buyer of the business. There are many factors to consider when selecting a potential buyer such as cultural fit, operational expertise, competition, and who might pay the highest price, among others.

No matter why you’re selling, whether for retirement, diversification or general liquidity, there are many different buyer types for you to consider. Potential buyers primarily fall into two categories—strategic buyers and financial buyers. Strategic Buyers Strategic buyers, by definition, are operating companies and often competitors, suppliers or customers of your business. They can also be non-competitive to your company but looking to grow in your market to diversify their existing revenue sources. The goal of a strategic buyer is to identify companies whose products or services can synergistically integrate with their existing operations to create incremental long-term value.

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