Seller Tips

Our experience over the past 30  years tells us that there are 7 types of buyers for most businesses .

The primary questions that you, the seller of a business, needs to answer are:

Which buyer is right for you?

Who will give you the most total value for the sale of your business ? 

Below is a list of the 7 types of business buyers. Click on them to reveal their characteristics; and some areas of caution.

Strategic Buyers

Add, diversify, or expand into a new business

Expand geographically or looking for synergistic fit (products & services)

Consolidation of functions typical (accounting, purchasing, human resources, etc.)

Owner may not be required to stay unless “Earn-out Deal Structure.”

Caution: Anticipate some of your people will be made redundant

Financial Buyers

Looking for consistent or higher earnings – increased earnings per share if buyer is a public company

Looking for growth opportunities and possible add-on acquisitions

Exit strategy – sell company or take public

Management Team expected to stay – few if any people made redundant. Owner can exit after earn out if management team is strong.

Caution: Looking at pure economics of the deal

Private Investment Groups – Equity Funds

Looking for synergistic fit with their portfolio companies if target company meets their investment criteria (revenues, EBITDA, etc.)

Looking for new “Platform Company” for eventual add-on acquisitions

Transaction will typically be a “recapitalization.” 70% to 80% equity in company with upside 3 to 5 years out through an IPO or sale

Not interested in day-to-day operations

Will provide strategic direction at the Board level

Caution: Requires strong management team in place

Industry Consolidators

Typically use the IPO “roll-up” as a strategy and then add-on acquisitions

Could be an equity group or a dominate company in the industry

The question – is bigger better if you are in the same geographic area with the other companies in the “Roll-up”;  and have very little synergy with the other companies?

Owner/sellers can anticipate a small amount of money upfront with company (buyer’s public) stock as major percentage of purchase price

Not an exit strategy unless a strong management team in place

Caution: Most IPO “roll-ups” in the 1990’s performed poorly

Caution: Typically 144 Restricted Stock and may have to wait in a long line to sell stock

Downsized Executive

Could be a good alternative if he has significant cash for down payment and company lacks a strong management team

Evaluate his entrepreneurial skills vs. big company mentality.  He may not be a “Hands On” person if this is needed

Consider a “Phased” transaction

Buys percentage of equity to learn business with option to buy remainder of shares

Caution: Avoid risk of taking note and substantial earn-out paid out of profits. You could get the company back

Management & Employees

Could be a good deal if a LBO-Leveraged ESOP (Employee Stock Ownership Plan) strategy is used

Don’t waste time or share financial and confidential information until they “HAVE” a commitment to finance the transaction – not “IF” they can arrange the financing

Caution: If leveraged ESOP is used, be prepared to pledge your proceeds from the sale (QRP) as collateral for their loan


Can typically expect consolidation of functions and people made redundant

Caution: Confidentiality extremely important in discussions – avoid word “Leaking” on street that you are for sale or in trouble – negative impact with customers

Caution: Competitor has valuable information if deal does not close (customer list, pricing strategies, etc.)

Caution: May not maximize value compared to other buyers