Selling to a Strategic Buyer

Strategic Buyer

A strategic buyer is a competitor or industry peer that wants to grow through acquisition. Strategic acquisitions provide many advantages to the seller and typically yield the most attractive financial terms.

Many buyers are willing to pay a premium for the following “strategic” reasons:

• Growth through acquisition - saves on the time, effort, and R&D costs that are associated with organic growth.

• Ability to capture synergies - strategic buyers have superior infrastructure and distribution capabilities that improve revenues, eliminate overlapping costs, and improve efficiencies.

• Add existing or ancillary/complementary products and services to current offerings.

• Expand geographical footprint into new markets.

• Reduce competition and capture market share.

• Deep pockets – Strategic buyers often have deployable capital and can pay cash. In some circumstances, they may structure an earn-out contingent on the performance of the acquisition.

This provides both upside and downside risk to the seller and sellers should work with an M&A Advisor and lawyer to ensure favorable terms. Just remember that selling to a Strategic buyer will most often yield the most attractive financial terms!