Financial Buyer

Good news: Interested in a company’s return on equity, investment burden and future cash flow. They are long-term investors and are looking for a well-managed company. They will quickly execute an acquisition.

Bad news: They are looking for a good ROI and will usually try to drive down the acquisition price. For example, they may see no value in buying a company for 6X EBITDA if they feel they can sell it for only 8X EBITDA in a few years.

Definition: A (financial buyer is a) type of buyer in an acquisition that is primarily interested in a company’s return on equity, investment, burden on management and cash flow. To determine this information, a financial buyer will carefully look over a company’s financial statements and assets.

A financial buyer is typically a long-term investor looking for a solid, well-managed company. Financial buyers rarely make any immediate changes, except in turnaround situations where companies are not currently profitable.

Many everyday retail investors could be considered financial buyers. An investor taking either a value or growth approach to investing over the long term is following many of the same strategies that large financial buyers do.

Another example of a financial buyer is a former executive looking to purchase a job by finding a company to manage or turn around; alternatively, he or she could just be holding companies looking for a good return on investment and plan to keep current management in place (Investopedia.com).