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Financial Buyer

Definition - What does Financial Buyer mean?

A financial buyer is a type of buyer that looks to invest in a private or public company, improve its operational performance over a period of time, and ultimately sell the investment to create liquidity. Financial buyers are often private equity firms that provide alternatives for company owners who still wish to remain involved in the business, for succession opportunities, or for growth scenarios where capital is needed.

Divestopedia explains Financial Buyer

Financial buyers sometimes get a negative connotation because some have leveraged the business after acquisition, delayed capital expenditures, and otherwise employed strategies that go against the general health of the company in order to monetize their return. However, not all financial buyers follow this approach, and most financial buyers can be excellent partners when the owner wishes to retain some control and autonomy. A good owner and management team, coupled with a supportive financial buyer and a solid growth strategy, can be a great value creating combination.

The opposite of a financial buyer is known as a strategic buyer. This is most often another company, generally in the same business, who would integrate the target. Strategic buyers can often afford to outbid a financial buyer due to cost and/or revenue synergies.

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Resources

  • Equicapita: Equicapita
    Equicapita's model is to acquire established, private small and medium sized enterprises (“SMEs”) located primarily in Western Canada.
  • Evolution Capital: Evolution Capital
    Leaders in growing small business.