Strategic Buyer

AAA

DEFINITION of 'Strategic Buyer'

A type of buyer in an acquisition that has a specific reason for wanting to purchase the company. Strategic buyers look for companies that will create a synergy with their existing businesses.

Because strategic buyers may actually get more value out of an acquisition than the intrinsic value of the company being acquired, strategic buyers will usually be willing to pay a premium price in order to have the deal go through.

Also known as synergistic buyers.

INVESTOPEDIA EXPLAINS 'Strategic Buyer'

Strategic buyers can come in many forms. A strategic buyer could be a competitor or a company in the same industry that wants to move into a new region. Purchasing an existing company in a new region may be more cost effective than starting new operations themselves.

Another possibility could be a company in an unrelated business, seeing that the company being acquired has strengths that could help their existing business. An example of this is a food manufacturer acquiring a supply-chain management/logistics firm.

RELATED TERMS
  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Search Theory

    A study of buyers and sellers who cannot instantly find a commerce ...
  3. Inward Investment

    The opposite of outward investment, an inward investment involves ...
  4. Merger

    The combining of two or more companies, generally by offering ...
  5. Target Firm

    A company which is the subject of a merger or acquisition attempt. ...
  6. Synergy

    The concept that the value and performance of two companies combined ...
Related Articles
  1. Fundamental Analysis

    Key Players In Mergers And Acquisitions

    Strategic acquisition is becoming a part of doing business. Discover the different types of investor groups involved.
  2. Options & Futures

    Pinpoint Takeovers First

    Use these seven steps to discover a takeover before the rest of the market catches on.
  3. Investing

    Why do companies merge with or acquire other companies?

    Some of the reasons for mergers and acquisitions (M&A) include:1. Synergy: The most used word in M&A is synergy, which is the idea that by combining business activities, performance will ...
  4. Active Trading Fundamentals

    Trade Takeover Stocks With Merger Arbitrage

    This high-risk strategy attempts to profit from price discrepancies that arise during acquisitions.
  5. Investing

    Use Breakup Value To Find Undervalued Companies

    Find out a company's worth if it were sold in pieces - it may be more than you think.
  6. Bonds & Fixed Income

    Trademarks Of A Takeover Target

    These tips can lead you to little companies with big prospects.
  7. Options & Futures

    The Basics Of Mergers And Acquisitions

    Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work.
  8. Fundamental Analysis

    What is the first day of the fourth quarter?

    Learn about different financial years used by various companies. Explore when the fourth quarter begins on October 1st and when it does not.
  9. Mergers are not the same as acquisitions.
    Investing

    What's a Merger?

    Mergers are not the same as acquisitions. In an acquisition, one company buys and subsumes another company, leaving only the buyer in place. In most mergers, both companies merge to form an entirely ...
  10. As the number of new employees increases, the marginal product of an additional employee will at some point be less.
    Investing

    More is Less: Diminishing Marginal Returns

    In formal economic terms, the law of diminishing marginal returns states that as the number of new employees increases, the marginal product of an additional employee will at some point be less ...

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center