Buyer perception will affect what a buyer is willing to pay for a business. It will also make difficult to consider the estimating the target business' value. A business is worth more to a strategic buyer where synergies, economies of scale and other integration benefits can be achieved.
How do we know which businesses are ripe for buying by a strategic acquirer? Most strategic acquirers look for the following characteristics when looking to buy a business:
High Growth
Strategic buyers look for those businesses with high historical growth or potential growth – such as businesses with a new product or service and in a new market.
Proprietary Product or Service
Businesses must have a product or service that is new to the market or that has a significant advantage over the competition.
High Margins
Strategic buyers will seek businesses with high gross profit margins and above average profitability. Businesses should have overhead and fixed expenses that can be decreased significantly or eliminated all together.
Untapped or Large Market
Businesses should be situated in a market that is either very large or new and untapped.
Quality Employees
Those businesses with low employee turnover and strong management are another element that strategic acquirers seek.