There Is a Buyer For Every Business
"I am in a niche market." "Who would like to buy my business?" These are just some of the concerns of owners when they put their businesses on the market for sale, which often pushes them to limit the types of potential buyers. However, entrepreneurs should not be limited to a particular kind of buyer. Different types of buyers usually have different purchasing strategies and end goals. Receiving all sorts of offers allows sellers to explore the best options. Investment banks generally group buyers into three main categories: strategic, financial, and individual.
Strategic buyers are often the first group owners to think about when deciding who will be interested in acquiring their business. They are companies similar to those of the seller and may include competitors. In this category, horizontally integrated strategic buyers are trying to increase their market share by expanding the segment, for example, by adding new regions, new markets, or new customers. It could be a buyer located on the other side of the country, which seeks to develop through the acquisition to reach new customers. On the other hand, vertically integrated strategic buyers want to expand their internal resources, i.e. by transporting part of the internal supply chain. For example, a distributor may seek expansion during domestic production. This allows the company to cut costs and rely less on critical or high-risk suppliers. This Works at all levels of the supply chain, from manufacturer to service provider. A strategic buyer can take different forms, each with their own unique set of objectives for a transaction, which will generate commercial value.
Financial buyers are the next necessary type of potential business buyer. The most common buyers in this group are private equity groups. Private equity buyers are looking for a return on investment for their investors. A private equity group can provide resources that a strategic buyer cannot access, such as growth capital, vital management resources, and new growth opportunities. While some of these groups plan to expand their activities for a period and then resell their extended activities for profit, others try to buy and maintain without resale plans. Usually, these buyers invest in areas where they have experience and can come up with new ideas and business opportunities. Vendors often think that private equity groups are only looking for substantial companies, but that is not the case. Private equity buyers generally seek additional purchases of all sizes.
The third category of buyers who play a role in the M&A community is a single buyer. These buyers are looking for their own business and sometimes even to operate a business. Individual buyers cover all sectors and have multiple procurement objectives. When the individual buyer is an entrepreneur who uses investor funds to research, buy, and personally manage a business, this is called a "research fund" model. Research Fund investment vehicles generally have several operators, sometimes called resident entrepreneurs, who are simultaneously looking for companies in which they can play a leading role daily. The goals, value propositions, synergies, and assessments of this group of buyers vary widely and can generally generate the best cultural fit for an outgoing seller.
There are firm, investors, companies, and individuals, national and international, who are trying to acquire companies in all sectors and all sizes. Also, sellers have different goals for a transaction, and there is no guarantee that any individual buyer will not meet these goals. There are countless potential buyers and, given all types, a seller and their broker will find the right buyer.