Definition
A strategic acquirer, or strategic buyer, is a company that buys another business because it fits what it already does: the same or a neighbouring market, overlapping customers, complementary products, a new region or part of its supply chain. Financial buyers, such as private equity firms, search funders and many family offices, mainly assess a business on the returns it can make on its own. Strategic acquirers also count synergies, meaning cost savings from combining operations and extra revenue from selling more to the combined customer base.
A search fund is a way for an individual or pair of entrepreneurs to raise money, find one business to buy and then run it as chief executive.
A family office is a private organisation that manages the wealth of one or more families. Many invest directly in private businesses and can hold them for many years.
Worked example
Greenlatch Pest Control is a fictional Australian business with EBITDA of A$500,000. A financial buyer values it at A$2,000,000 on its own.
A larger pest control group, also fictional, expects to save A$150,000 a year by combining routes, vehicles and administration. With those savings, it can offer A$2,400,000 and still expect a better return than the financial buyer would earn at A$2,000,000.
EBITDA is earnings before interest, tax, depreciation and amortisation. It helps compare operating profit across businesses, but it is not the same as cash.
Why buyers care
If you are a strategic acquirer, be careful about paying the seller for synergies that only you can deliver. Integration takes time and money, and some customers and staff leave when ownership changes. Count only the savings you are confident of, and allow for their cost.
If you are a financial buyer, expect strategic acquirers to outbid you where overlap is high. You may do better with businesses where synergies are limited.
When a competitor is bidding, sellers often restrict what they share in diligence, so strategic acquirers may see less detail before committing. Build that into your price and protections.
Due diligence is the investigation a buyer carries out before committing to a purchase, testing the finances, contracts, legal position and operations against what the seller has described.