Call : 780-756-2990

Edmonton Business Brokers – Tip of the Day

What Type of Buyer is Right for Your Company?

Part 1 of 3

Different types of buyers have different objectives and levels of experience. Knowing these differences can help you in getting the deal you want.

As you begin your discussions with potential buyers, it’s important to keep in mind that their goals and objectives can vary greatly. In general, buyers can be classified into three major categories: strategic companies (both public and private), Private Investment Groups, and individual investors.

Each business buyer type presents a unique set of advantages and disadvantages that can have great impact on the ultimate outcome of the sale. Understanding these differences can help you, both in your negotiations and in finding the best buyer to meet your business and personal goals.

Strategic Companies
Acquisitions by strategic buyers are generally driven by potential synergies between the acquirer and the target entity. For example, you may have a product or service that the buyer lacks, but is highly complementary to their product or service offering. Or, you may have an established presence in a certain geographic or customer market that the acquirer has had difficulty penetrating.

This focus on synergistic value may result in higher offers from this buyer group than from others, since the operational efficiencies that are created can provide immediate higher profitability and a more rapid return on investment for the buyer.

Public and private strategic buyers differ in that the liquid market for public company shares may create a more aggressive valuation for public firms over those that are private. This may allow the publicly traded company to pay a premium price for your business, especially if you’re willing to accept a stock-for-stock transaction.

The company structure after the sale may also differ with a sale to a strategic buyer. For instance, unless management is viewed as absolutely critical to maintaining company performance, these buyers generally don’t require that the active, selling shareholders remain with the company much past a short transition period (generally six months to a year). Also, depending upon the size of the target and the logistics involved, the buyer will oftentimes completely absorb the target company into its current operations, making the ability to relocate the target company an important consideration……. Part 2 on Tuesday

Brought to you by:

Dwight Lester, Performance Business Brokers, Edmonton Alberta


Comments are closed.