Private equity vs strategic buyer: which is better for my exit?

A strategic buyer is a company already in or adjacent to your industry, a competitor, supplier, or larger operator, that buys you to gain customers, capabilities, or geography. A financial buyer like private equity buys for the cash flow and growth, planning to improve the business and sell it again later. The two compete on very different terms.

Strategic buyers often pay the most, roughly 5x-10x EBITDA, because they can capture synergies, such as eliminating duplicate costs or cross-selling to your customers, that a financial buyer cannot. The catch is that a strategic may absorb your operations and cut redundant roles, you usually exit fully rather than sharing in future upside, and you may have to share sensitive information with a direct competitor.

Private equity typically pays 4x-8x EBITDA but offers things a strategic often will not: equity rollover for a 'second bite of the apple' if the business grows, a continued role for you and your management team, and usually less disruption to staff and brand. The trade-off is that you keep working and the business gets integrated into the firm's plan.

The right answer depends on your priorities: top price and a clean exit, versus rollover upside, your future role, and what happens to employees and brand. DealSeam is not a traditional business broker; we introduce owners to both strategic and private equity buyers where there is a fit, with the buyer paying our success fee.