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6 kinds of business buyers

SaleSale (Photo credit: Gerard Stolk (vers l'Ascension))

Buyers of businesses can generally be categorized as belonging to one of the following groups, and some buyers belong to more than one:

The Individual Buyer: This typically is an individual with substantial financial resources and with the type of background or experience necessary for operating a company. This buyer will typically seek a company that is profitable and will provide a return on their investment. If they lack in financial resources they will turn to family members or other resources for additional financing and rely on the Seller for some financing. These buyers will typically limit themselves to transactions of less than $1 million. Most of these buyers will come from unhappy or unsuccessful job situations.

The Strategic Buyer: This buyer is almost always a company trying to enter a new market, increase its market share, seek a strategic gain or to eliminate a competitor. These buyers can be in the same business or a competitor and will usually seek businesses with sales in excess of $20 million with a proprietary product and/or a unique market share with management willing to stay.

The Synergistic Buyer: Like the strategic buyer, this buyer is usually a company. They seek companies that, by joining the two together, will be worth more (i.e. 2+2=5). The benefit of this type of acquisition helps both companies be more competitive and profitable.

The Industry Buyer: This is often characterized as the “Buyer of Last resort”. The buyer is often a competitor, knows the industry and will not want to pay for the seller’s expertise.  Their interest is in reducing costs by combining the operations. They will typically pay only for the assets (usually not all of them and at a price below the market value). This buyer does not pay for goodwill or want to employ the Seller.

The Financial Buyer: This buyer is driven by the projected return on their investment.  They will have access to financing and will leverage it as much as possible.  Their sole purpose is to make the maximum amount of money with the least amount of their capital.

The Inside Buyer: These are family members or employees and will usually be the most difficult to deal with, require the largest amount of seller financing and often fail to make the payments to the seller. They often rely on the sympathy of the seller.

Steve Sink

Certified Business Intermediary

Merger and Acquisition Master Intermediary


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