What Type of Buyer is Right for your Company?

Part 3 of 3

Individual Investors
Individual investors are high net worth individuals seeking to own and manage their own company. Individual buyers expect to be integrally involved in the leadership and management of the company after their purchase. This buyer segment is usually more focused upon the geographic location of the target than its industry, as the buyer is typically not seeking to relocate.

Most individual investors are seasoned businesspeople, with experience in either corporate positions or other entrepreneurial ventures and ordinarily prefer established businesses with proven performance to newly started companies. Due to capital constraints, individual investors usually purchase businesses at the smaller end of the middle market spectrum.

The advantages of working with an individual investor include:

• They’ll have direct involvement, and therefore a stake in the success of the business
• They generally only require active shareholders to remain for a short transition period
• They’re usually not seeking  to relocate the business or drastically change operations and culture

Possible disadvantages include:

• They’re typically  inexperienced in purchasing businesses, which may prolong negotiations
• Their financing and deal structure options are normally not as broad as with other buyer segments
• They’re not as likely to pay a premium price for the business
• They may not have direct industry expertise

Keep in mind that the payment portion of a buyer’s offer should not be your only focus in a transaction. Your understanding of the buyer’s ultimate plans for the business, their expected level of involvement and network of resources, are all important considerations. Knowledge of a buyer’s expectations for the business can be highly beneficial for both negotiations and the closing of a successful deal.

Brought to you by:

Dwight Lester, Performance Business Brokers, Edmonton Alberta