Types Of Sellers

Last updated: March 22, 2024

What Does Types Of Sellers Mean?

Types of sellers refers to the three classifications in which a seller of a company may fall into. These three classifications include those sellers that pro act, sellers that react, and sellers that are looking for a strategic partnership.

A proactive seller would prepare the business for sale well before an actual sale occurs. This preparation would include adding management and systems, so that the owner is able to exit quickly once the sale occurs. A reactive seller is not prepared, but rather is forced into a sale sometimes unexpectedly due to one of the "5 D’s" – death, divorce, disability, disenchantment, or desperation. In contrast, a strategic seller is one that may have been a bit proactive, certainly is not subject to the 5 D’s, but rather requires additional capital or managerial expertise to continue growing the business.


Divestopedia Explains Types Of Sellers

The types of sellers that usually look for a quick cash exit are those that are pro acting or reacting. The proactive seller has been planning for the sale for a longer time, and usually does not want to carry on managing the business. They therefore want a higher cash consideration for other life objectives, and would match up better with a corporate buyer that may pay a higher purchase price. Similarly, a reactive seller may be desperate to monetize some equity in order to address one of the 5 D’s. This type of seller will also look for a higher cash consideration and match up better with a corporate buyer.

A strategic seller may be more willing to take non-cash consideration such as equity in the acquirer, because he/she will remain responsible for growing the company with supporting capital and management from the buyer. Financial buyers such as private equity firms are better suited to partner with strategic sellers, because the objective is to grow the company further and monetize at a higher valuation in the future.


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