Part 4: Understand the Types of Buyers
Who are the different kinds of buyers and what to expect with each.
Private equity, venture capital, corporate, search fund, independent sponsor, to individuals – there are many types of business buyers and not everyone will be the right fit for you. Understanding them ahead of time can help you avoid wasting time, or at least as the right questions. The table below summarizes at a high level the different types of buyers – but keep in mind there are nuances and exceptions all.
Looking at the above table, you might ask “well how do I know what is right for me?” That answer depends on what you are looking for. If you are seeking an investment partner with deep pockets to let you run the day-to-day of your business, the Private Equity / Venture Capital route is likely the right one for you. If you want flexibility on terms, step away from the business, and hand the reins off to someone who is going to build the business long term, then a search fund may be right for you. Or, your competitor may be able to pay top dollar if they see significant overlap in distribution channels or complimentary products.
The above table is meant to help you think about what parts of the transaction, beyond the valuation, are important to you. Then ask prospective buyers whether they can meet your expectations.
New Zephyr is a funded search fund and I would welcome the opportunity to talk to you about the advantages of our model.