The 4 types of buyers?
- April 28, 2021
- Posted by: gastonreeder
- Category: Uncategorized
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In the small business acquisition market there are 4 primary buyer groups. Each of them value companies differently and are suited towards particular types of transactions.
It’s important that you, the business owner, and your representation clearly understand the type of buyers that will likely meet your expectations before entering the market.
- Lifestyle / Individual Buyers:
Lifestyle or individual buyers are typically looking to purchase a job. They are best suited towards smaller less complex transactions and often use an SBA loan to buy the company. - Private Equity:
PE groups pool capital to purchase businesses then use their expertise to grow the business to new heights before selling again. Typically PE will require a minimum of $2M in earnings.
- Strategic Buyers:
Strategic acquisitions occur when a larger company purchases a smaller business that is complimentary to their own. Oftentimes, a strategic buyer will uncover value not available to the other buyer groups through reduced operating costs, economy of scale, and cross selling opportunities. - Competitors:
Competitors are typically the buyer of last resort as they often value companies significantly lower than the other buyer groups. Further, disclosing information to a competitor can pose a confidentiality risk.
If you’re thinking about selling your business, get in touch with one of our transaction advisors to discuss which type of buyer will most likely meet your unique goals and expectations.