2014 will end as a great year to sell a business. The strategic buyers came back in the market in a large way. Many of the top deals in the US this year, were done by strategic buyers. What is a strategic buyer, and why this year?
Strategic buyers have a strategic reason to buy. They may be a larger competitor that wants to buy market share. The strategic buyer could be in the same industry, and your company may have some technology, some customers, or some geography that they want or need.
We are seeing strategic deals done in banking, pharmaceuticals, real estate, airline, insurance, manufacturing, healthcare and other industries.
Why this year? Historically low interest rates, give strategic buyers and financial buyers the opportunity to buy, and use debt with very low interest rates. The benefit to the buyer is that the debt does not cost them as much as it historically has, and therefore the buyer will have a better return with the lower cost of capital.
With the US economy continuing to grow, confidence in board rooms and management teams has had a big factor in the confidence to buy businesses.
Additionally, we are in a low growth environment, so making acquisitions is a great way to speed up the growth of a company.
So we low interest rates, a growing economy, improving confidence in the future economy, this has been a great environment for strategic investors to come back in full force in 2014.