Which of the following statements is correct? Financial buyers are institutions that provide capital and are not operators. Financial buyers are operating partners that try to create synergies. Strategic buyers are asset managers that are trying to time the purchase or sale of a business. Strategic buyers are institutions that provide capital and are not operators
Answers
Answer:
Strategic Buyer Explained
Essentially, a strategic buyer is interested in how the acquired firm aligns with his long-term business plans. There can be different reasons for acquiring a new company, such as for vertical integration (geared toward clientele or suppliers), horizontal expansion (exploring new markets or product lines), getting rid of competitors, or helping to eliminate or overcome market weaknesses of the acquiring company.
Often, strategic buyers are willing to pay more for companies than financial buyers. One reason is that a strategic buyer is better placed to realize synergistic benefits almost instantly. This is because of the economies of scale that may arise from integrated operations. The more the acquired business fits into the existing company’s structure, the more a strategic buyer will want the business and the higher the premium he will be willing to pay.
Secondly, strategic buyers are usually large and well-established companies with easier access to capital. As a result, they may possess a different currency, in the form of stock. In fact, a strategic buyer can pay for the acquisition by purchasing stock, paying cash, paying stock or through some combination of purchase methods.
Answer:
2nd one is the correct answer.
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