Who is the ideal buyer for my business?
That is one of the more common questions we get from the owner selling a printing or print-related business. Let’s see if we can answer it.
Strategic vs. Financial Buyers
Two types of buyers make the bulk of the acquisitions: strategic buyers and financial buyers.
A strategic buyer typically is a company that provides products or services in the same industry as the seller. Strategic buyers acquire companies that can complement or expand the operations of the buyer’s existing business.
A financial buyer is often a private equity group or venture capital firm. Their sole purpose is to buy a company, then sell it down the road at a profit.
Those are simplified definitions. Some buyers have aspects of both a strategic and a financial buyer.
In general, strategic buyers are often an ideal choice for owners for small- to mid-sized companies.
Benefits Strategic Buyers Offer
Based on my 45 years of deal-making experience, here’s why I believe small- to mid-sized business owners can benefit from choosing a strategic buyer.
- More value. Because a strategic buyer usually works in the same business as you, the buyer can realize more synergies between the two businesses, get a faster ROI, and most importantly, pay more for your business. And they will pay you for more of your business because they won’t require you to keep “skin in the game.”
- More money to invest. A strategic buyer doesn’t usually finance the deal by adding debt to your balance sheet. As a result, the business has more capital to invest in the facility, equipment, technology, employees, and other resources to grow the business.
- Faster closing. Because a strategic buyer usually works in the same space, they understand your business better, and can move quickly through the entire process. They still will scrutinize your business and your books; they’ll just do it as a faster clip.
- Better certainty of closing. Because a strategic buyer understands your business better, there will be fewer surprises. This should result in a greater likelihood of closing under the same terms and conditions as offered — or even of closing at all.
- More opportunities for customers. With a strategic buyer, you can offer your customers more products and services. You can deepen your relationships with them, providing more solutions for their business.
- More opportunities for employees. With a strategic buyer, your employees can improve their skills and have more and better career opportunities.
- A one-and-done deal. When a strategic buyer makes an acquisition, it’s their intent to hold the business. A financial buyer will sell the business down the road, so you will experience this disruptive process all over again.
- Different and better decisions. A financial buyer makes decisions in the best interest of their investors and will typically stop investing in the business during the last few years before they sell the business. A strategic buyer makes decisions in the best interest of their shareholders, customers, employees, and community and will continue investing in the business.
These are some advantages I have witnessed in matching small- to mid-sized businesses with strategic buyers. But there may be other advantages as well depending on the size and nature of your business.
At the LaManna Consulting Group, we have learned that no two businesses are alike. While it often makes sense to find a strategic buyer for your business, there may be instances in which a financial buyer would be a better fit for your situation. If you are thinking of selling your business in the near future, give us a call and we can provide some guidance.
Thinking about selling your business? We find buyers – that’s our job! Call me and let’s talk. (561) 543-2323