You probably know about the two main types of buyers in the M&A industry: strategic buyers and financial buyers.
Financial buyers are generally investors, searching for return on their money by reselling the business in increasing cash flow. On the other hand, strategic buyers are often already business owners, acquiring companies that fit into their existing one.
The reason that strategic buyers often dole out more cash at closing is because they are more interested in what they can gain from the company itself. If a seller has a product that they are missing from their line, they may acquire that company in order to make their business better-rounded. While their sights are still on more revenue, they are also looking to enhance their own long term business plans. Another reason that strategic buyers pay more is that often they are buying out their competitors, so they need to dangle a hefty price tag in front of their targets in order to get them to comply.
Financial buyers are more focused on monetary gain than the actual business, so they look for a lower price so that they can resell for a bigger return. One type of buyer is not necessarily better than the other, however; strategic buyers are in general known to pay more at closing than financial buyers.
If you need help selling a business, contact George & Company for a free consultation.