Financial Buyer
Financial buyers are generally influenced by a demonstrated return on investment, coupled with their ability to get financing on as large a portion of the purchase price as possible. Working on the theory that debt is the lowest cost of capital, these buyers purchase businesses with the sole purpose of making the maximum amount of money with the least amount of their capital invested.
No matter which buyer types is interested in your business, when it comes to ownership transfer, the highest price bid may not be the best deal for you. A number of critical issues could override a decisive price difference among competing bids:
Financial buyers are generally influenced by a demonstrated return on investment, coupled with their ability to get financing on as large a portion of the purchase price as possible. Working on the theory that debt is the lowest cost of capital, these buyers purchase businesses with the sole purpose of making the maximum amount of money with the least amount of their capital invested.
No matter which buyer types is interested in your business, when it comes to ownership transfer, the highest price bid may not be the best deal for you. A number of critical issues could override a decisive price difference among competing bids:
- Financial ability of the bidder to close the deal.
- Contingent liabilities that you must accept for some period after the sale, such as those related to environmental problems, pending litigation and the salability of stocks.
- Contingencies or ‘outs’ in the buyer’s offer, such as due diligence, environmental audits, financing, board or parent company approvals.
- Employment agreements for the seller and key employees, including length and level of compensation.
- Form and timing of consideration to be paid if other than cash, such as loan notes, shares and earn-out.
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