When it comes to selling a business, it’s important to understand the role of what’s called a “strategic buyer.” Both private equity (PE) firms and mergers and acquisitions (MA) firms often work with strategic buyers. But what exactly is a strategic buyer? Simply put, it’s when one company purchases another with the goal of improving or expanding their own operations.
There are many reasons a business owner might receive an offer from a strategic buyer. One common reason is expansion—whether geographically or operationally. For example, a company that owns a metal fabrication shop might sell to a strategic buyer who wants to expand their operations in that specific field. Alternatively, the business being acquired might offer a product or service that complements or enhances something another company already offers. Sometimes, the strategic buyer simply wants to eliminate competition to gain market share.
While working with a strategic buyer can often be a win-win, there are some important things to keep in mind. One major point is the potential for a significant reduction in staff. Since strategic buyers typically already have their own internal operations—such as an accounting team—they might not need the same departments in the company they’re acquiring. This means that positions or teams in the acquired company may be let go, not out of malice, but simply as a result of the new company trying to streamline operations and maximize efficiency.
Selling a business involves many moving parts, and there’s no one-size-fits-all approach. It’s critical to do your homework and understand the company making the offer. If something doesn’t feel right, don’t be afraid to walk away. This is why, as I’ve mentioned in earlier chapters, having the right team to guide you through the process is so crucial. They can help you make an informed decision and determine the best type of sale for both you and the business you’ve built. And remember, hiring a professional with significant experience in successfully navigating business sales can make all the difference.
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