There are three different types of buyers when it comes to business acquisitions. Financial buyer, Synergistic buyer and Strategic buyer.
Financial buyer is primarily interested in a company’s return on equity, investment, burden on management and cash flow. This buyer will carefully look over a company’s financial statements and assets. They will look at the SDE, which is the seller’s discretionary earnings as they will be running the business themselves.
Synergistic buyer acquires another company in order to leverage its existing organization, such as its administrative platform, sales channels, clientele base and their management team. This buyer is rapid and long-term growth seeker who will use acquisitions to create synergies. This can very well be a private equity firm.
Strategic buyer has a specific reason for wanting to purchase the company. This particular buyer will look for companies that will create an interaction with their existing businesses. This buyer will likely be a holding company or family office that is looking to do a roll up of similar businesses. This buyer will be looking at the EBITDA of the business, which stands for Earnings Before Interest, Taxes, Depreciation and Amortization, as they are already familiar with the industry.
All of these three business buyers will evaluate the business in their own distinct way because they have their own specific need. Hopefully, now you have a good idea of the three different types of buyers when it comes to business acquisitions.
We at GillAgency represent businesses in the lower middle markets. Which means we represent businesses that have revenue in $5MM to $50MM and have buyers that fit into all of these three categories. We are always here to assist, please contact us via https://gillagency.co/contact-us