Whether to sell your business or not, that was the question. You and your team labored long and hard building a successful middle-market business, and now you’re at the point in your career when you’ve decided that you want to sell it. Should you sell to a strategic, financial, or an industry buyer? Lions and tigers and bears, oh my! Not quite, but the choices could be overwhelming. Understanding these different types of buyers will help position your business for the best possible outcome when it comes time to sell.
Let’s first start with some definitions. Simply stated, a strategic buyer is an operating company from another, typically related, industry that acquires a company to expand its services and/or client base. A financial buyer, also known as a buyout firm, typically acquires majority control of a business in an industry they are not currently invested in with the goal of increasing shareholder value and reselling their stake at some point in the future. An industry buyer is a company that acquires another business from the same industry, typically for expansion purposes.
All three types of buyers bring different attributes with them to a selling company, and each will approach value and deal structure differently. Sellers will perceive these attributes as positive or negative depending upon their individual desires and needs. This whitepaper will compare and contrast these buyer types over three critical elements of a sale: pricing, growth, and the role of the owner post sale.