Strategic Buyers vs. Financial Buyers - Strategy motivates the
restructing of a Business for a particular purpose, change of corporate governance and need to re-think or Review brand identity.
Strategic Buyers want either vertical (the
buying of supplier of a business) or horizontal (usually
between two companies in the same business sector. ) synergies
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Economy of scale:
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Economy of scope: eg. scope of marketing and distribution, or different types of products.
- Increased revenue or market share: eg. absorbing a major competitor, capturing increased market share
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Cross-selling: expanding sphere of customers, via up-stream, down-stream or manufacture of complementary products.
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Synergy: eg. increased opportunities, managerial specialization. Another example is purchasing economies due to increased order
size and associated bulk-buying discounts.
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Taxation: take Advantage of tax losses or exploit tax schemes .
- Geographical or other diversification: boosts investor confidence
- Resource transfer: eg. information asymmetry or scarce resources
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Vertical integration: Vertical integration occurs when an upstream and downstream firm merge (or one acquires the
other
- Hiring: some companies use acquisitions as an alternative to the normal hiring process.
- Absorption of similar businesses under single management: similar portfolio invested by two
different mutual funds namely united money market fund and united growth and income fund, caused the management to absorb united money market fund into
united growth and income fund.
- Access to hidden or nonperforming assets (land, real estate)
- Acquire innovative intellectual property
Other -
two irrelevant companies
Financial Buyers are looking to maximum equity returns and later resell the Business.
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