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Difference between strategic & financial investors - Apohan Corporate Consultants Pvt. Ltd.

Difference between strategic & financial investors

Apohan Corporate Consultants Pvt. Ltd. > Mergers & acquisitions > Difference between strategic & financial investors

 

There are basically two types of investors that are looking for buying a private limited business.

  1. Strategic investors
  2. Financial investors

 

Strategic investors:

These investors are cash rich companies (i.e. businesses themselves) with a long history in a sector. They are not any kind of financial company or institution. They know the sector the product, market and the business in and out. Acquisition of a small private limited company provides a lot of benefits for these companies in terms of speed of expansion and other synergies.
When to look for strategic investors? Strategic investors typically would provide more valuation. They will be also willing to acquire assets in financial distress as they understand the target business perfectly and know how to extract value from the asset. Hence, it makes a sense to approach the strategic investors in difficult financial times.

Financial investors:

Financial investors are individuals or financial companies or other types of financial organisations which collect money from the ultimate savers such as general public like you & me, financial intermediaries like banks, NBFCs, various types of funds, various types of schemes, etc. Their understanding of the technical, operational & market part of business is relatively lesser compared to the strategic investors but more compared to the banks. They invest with a perspective of a limited number of years. They want to exit from the business after adding a lot of value during its growth phase. Financial investors are experts in valuation, mergers and acquisitions, transactions, equity contracts and they have immense negotiation skills. If a private limited business or a small-cap listed company directly approaches the financial investors, they may lose on valuation as well as terms of the contract. It is better to approach to expert Consultants.

When to approach financial investors: When the growth story of a company is clearly evident, a company can approach the financial investors. They join in when there is potential but no capital, they help in creation of a huge value at a fast pace and exit creating value for all.

Apohan very well understands the difference in the approach of strategic investors and financial investors. Apohan carries out professional, end-to-end, customized consultancy services by approaching the right kind of investor to achieve the objectives of the client business. Apohan carries out all types of equity transactions, right from the problem identification phase, to the closure of deal with perfection.


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