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. Warren Buffett

    Known as "the Oracle of Omaha", Buffett is Chairman of Berkshire ...
  2. Acquisition

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

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

    The opposite of outward investment, an inward investment involves ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies ...
  6. Merger

    The combining of two or more companies, generally by offering ...
RELATED FAQS
  1. 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, ... Read Full Answer >>
  2. How can I calculate funds from operation in Excel?

    In general, the terms "work in progress" and "work in process" are used interchangeably to refer to products midway through ... Read Full Answer >>
  3. When does Q4 start and finish?

    Most companies such as Facebook have financial years that end on December 31st. For these companies, the fourth quarter begins ... Read Full Answer >>
  4. When is it useful to look at a company's fixed asset turnover ratio?

    It is useful to look at a company's fixed asset turnover ratio when an outside observer, such as an investor, wants to know ... Read Full Answer >>
  5. What is the difference between perfect and imperfect competition?

    Perfect competition is a microeconomics concept that describes a market structure controlled entirely by market forces. In ... Read Full Answer >>
  6. How difficult is it to understand business analytics?

    In the abstract, business analytics is the study of financial, economic, consumer and production data through statistical ... Read Full Answer >>
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. Active Trading Fundamentals

    Trade Takeover Stocks With Merger Arbitrage

    This high-risk strategy attempts to profit from price discrepancies that arise during acquisitions.
  3. Bonds & Fixed Income

    Trademarks Of A Takeover Target

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

    Pinpoint Takeovers First

    Use these seven steps to discover a takeover before the rest of the market catches on.
  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. Options & Futures

    The Basics Of Mergers And Acquisitions

    Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work.
  7. Economics

    Understanding Management by Objectives

    Management by objectives is a process in which a manager and an employee agree on specific performance goals and then develop a plan to reach those goals.
  8. Economics

    What Does Going Concern Mean?

    Going concern is a concept used in business and accounting to describe the fiscal health of a company.
  9. Fundamental Analysis

    Calculating the Capacity Utilization Rate

    Capacity utilization rate is a ratio used to compare a current usage level against a maximum potential level.
  10. Economics

    Explaining the Supply Chain

    A supply chain is the cumulative network involved in moving raw materials, components and finished products from original suppliers to end users.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!