Strategic Buyer: Has His Own Strategic Reason For Wanting Your Business.
A strategic buyer is usually in the same business as you are, or would like to combine your business with what they do. If you are in a business where your geographic reach is limited by the nature of your product or service, and they are in the same business but elsewhere, they may want your business. It will give them access to a larger market, without having to fight for it. This is frequently known as buying market share.
Your business may have some unique technology, process, or business methodology that another company would like to access. This could move their management to investigate becoming a strategic buyer of your business. They may do this rather than trying to license this unique aspect of your business, because they believe they have a broader vision for capitalizing on this uniqueness than you have.
A prospective strategic buyer may act because he finds your presence disruptive to his business. Rather than putting up with your disruptive practices, he will offer to buy your business. You would be unwise to underestimate the strength of his motivation.
Sometimes this buyer is moved to action because of an action on the part of a highly valued customer. This customer may have started or bought a business in your geographic area, and requested that the prospective buyer follow, to be able to provide local delivery of product or service. Alternatively the prospective buyer may offer to do this, to prevent you or any other local supplier from making any inroads with his customer.
There are undoubtedly other compelling reasons also. However, there are a couple of important considerations. A strategic buyer will already be in business. A management team will exist. Proven, documented systems and processes will probably exist within the buyer's own company. His management team will likely feel comfortable that they could be implemented in your business.
So your strongest asset to this kind of buyer is your presence in the market place. Who said 80% of life is just showing up. And/or whatever technological advantage you can bring. If you don't have a strong management team in place allowing you to be away for long periods without concern, your prospective buyer probably doesn't care. He will see little point in duplicating his existing management structure unless it is absolutely necessary.
If you don't have all the systems and processes in place, and documented, again he probably doesn't care. About the only thing that is likely to drive him away, and disqualify you as an acquisition candidate is a bad reputation.
If the reputation of your business in its market is one of delivering inferior products or service, that may disqualify you. However, this knowledgeable buyer may find that to be an easily fixable problem when he examines the situation carefully. Providing he can avoid paying for what he must fix, he may still be interested.
Strategic buyers can be easy to identify and target. They are usually either competitors in your own geographic market, or they are in a similar or identical business in another market area. You likely already know them or know of them. Or you probably belong to the same industry organization or association as they do.
The ease of identifying them and therefore contacting strategic buyers may be offset by the fact that making that contact may be a matter of some delicacy for you. You may not wish your competitors or people in similar businesses elsewhere to know that you wish to sell. There are ways to handle these problems. They will be discussed elsewhere. See
Professionals As Intermediaries
Selling to this buyer is a frequently used exit strategy for a business owner. It is unlikely to give you top price. But a strategic buyer has the background to understand what you have and decide quickly. That doesn't mean that he will act quickly. However, if he has approached you, then it is highly likely that he will decide and act quickly.
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