Types of Investor’s Seeking Acquisitions

By Tom Cobery
In May 27, 2016

There are generally three types of investors seeking an acquisition: Strategic; Private Equity Company; or Individual Private Investors.

A strategic buyer is looking to purchase companies that offer some of the following opportunities:

  1. Gain new technologies to improve efficiencies
  2. Gain new products or services to offer to their distribution network
  3. Fill excess capacity that they may have on their existing equipment

If the selling company serves a market that is receiving high multiples, say 5 to 6 times, a strategic buyer will be quite competitive. They will have synergies that help offset the higher multiple. Those synergies may lower the actual multiple paid to 3.5 or 4 times.

A private equity company is typically a company that has been purchased by an equity firm that is seeking to do a rollup of small- to medium-size companies within the same market. The PE company is seeking the same synergies that a strategic buyer is, but is also looking for economies of scale. An example of this would be greater buying power of raw materials. A PE company is not going to stay with this investment for a long period of time, 5 years is a norm. Their plan is to flip (sell) the now larger entity at a multiple greater than what they paid.

Personal investors are typically individuals with deep pockets looking for sound investments or becoming backers for individuals who show promise to grow a target company that will produce an economic gain. A personal investor is looking to put as little of his or her money into the deal, borrow against the assets acquired, bring on senior debt and, most importantly, will be looking for the seller to take back paper (debt) to help fund the proposed acquisition. In many cases, the senior lender requires the seller to participate.

If you want to chat, give me a call at 201-523-6326 or e-mail me at tcobery@epicomm.org.

Tom Cobery

Dealing with the day-to-day needs of running a busy printing operation often leaves company leaders little time to plan for the future of their enterprises on their own. Tom works with chief executive officers and senior management executives in the Tag and Label Industry to develop growth opportunities through strategic transactions, new markets, or new service opportunities. Available for consulting on individual projects, he can also be engaged to serve as an Advisory Partner, helping executives guide their company into the future, serving as an impartial sounding board for ideas, and working with them to set the right course for continued growth and greater profitability. Tom’s personal experience as a Tag and Label Industry company president and chief executive officer, plus his extensive networking with other industry executives through his volunteer leadership activities with the Tag and Label Manufacturers Institute (TLMI) give him a unique perspective on the tough issues today’s company leaders face in this specialized segment. Companies engaging Tom will find his insight and independent advice an invaluable asset in helping them achieve their growth and profitability goals. More than a consultant, Tom Cobery wants to be your trusted Advisory Partner.

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