Selling to third parties
may come in the form of a stock purchase
, asset purchase
, or a merger. The buyer may be a competitor of the target business, a company in a similar market looking to expand into the seller/target business’s market, an investment fund, or a wealthy individual. There are generally two types of purchasing third parties that differ in motivation. There is the strategic buyer and the financial buyer.
The strategic buyer uses cash and/or equity to acquire the business and does not need financing. The strategic buyer often has a limited role in the existing management of the business. For these buyers, cultural issues and synergistic considerations are important in determining price and are used to enhance a strategic buyer’s market value. This buyer will likely operate the business as part of its organization on a stand-alone basis or may integrate it into an existing business. Lastly, the strategic buyer often has familiarity with the target’s business.