Financial and Strategic Buyers of Businesses

Depending upon their underlying motivation for acquiring a business or businesses buyer will be categorized as a financial buyer or strategic buyer by business intermediaries, including both business brokers and investment bankers.

Financial buyers generally buy almost any type of well-run business. Their interest is almost always based upon reliable cash flow generated by the business as opposed to projected future earnings. Financial buyers commonly want, to retain management and usually prefer to buy using leverage.

Strategic buyers acquire businesses based upon how the business will fit into their long-term business plans. Usually, they want to expend by means of vertical integration or horizontal integration. Strategic buyers often will pay more than financial buyers because they are able to realize synergistic benefits.