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Who might buy my company?
The Three Buyer Types
There are three types of buyers who purchase most businesses with annual revenues between $2 million and $20 million:
- Strategic buyers are companies already involved in your industry, who want to build their own businesses via acquisition. Many companies find that buying another company is easier and quicker than building business organically by finding new clients. Examples of strategic buyers include current local direct competitors, competitors in other locations who want to expand their geographic footprint, or companies with a slightly different current target market who want to expand into your target market.
- Financial buyers include private equity firms or other types of investment groups that have raised capital and may be interested in helping you or another management team expand the company for a future sale or other liquidity event. Financial buyers are usually looking for companies with strong current and projected growth.
- Wealthy individuals such as high-net-worth former entrepreneurs or corporate executives are also frequent buyers, either by themselves or in conjunction with other partners who may provide some financing. We find this type of buyer especially common in New York City, where there is a large base of family capital and many high-net-worth individuals.
We also frequently see hybrids of these types of buyers, such as successful serial entrepreneurs who have started small private equity firms.
Strategic buyers have historically had the reputation for paying the best prices to acquire a company, but in today’s market with excess private capital funds available, strategic buyers may be outbid by aggressive private equity buyers.
Other Frequently Asked Questions:
How much is my business worth?
How long does it take to sell a company?
When is the best time to sell a company?
When should I tell employees about a potential sale?
What role does a business broker or investment banker play?
