"Strategic Buyers Only"

May 12, 2025

by a searcher from IESE Business School in Houston, TX, USA

I’m currently evaluating a deal where the broker has indicated I’m being taken out of the process in favor of “strategic buyers only.” Context - I’m a committed, hands-on Independent Sponsor with operational and corporate experience in the industry. - I also have another live deal in another industry ( in which I also have experience) with this broker, still evaluating which one pursue further after I am able to talk to the owner of the Chemical/Plastic company Any advice on how to reframe my value or re-engage with the broker to stay in the race? Do you ever bring in minority strategic partners to help break into deals like this? Appreciate any insights or experiences, I can DM you if you prefer.

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Reply by an intermediary
from Pepperdine University in Portland, OR, USA

There is often a price premium and better terms achievable with strategic buyers - for example, I sold a small business to a publicly-traded strategic for 22x EBITDA, and we likely would have only been able to sell for 6x to a financial buyer - there was a narrow field of strategics who could immediately exploit IP my client owned throughout their companies. In other cases there are seller concerns about the ongoing long-term viability of their company and, for example, maybe they are already facing challenges competing with larger companies due to economies of scale and they want to sell to a company that they perceive have higher odds of long-term success for the sake of their employees, vendors, and customers. In my experience, strategics also have a much higher probability of closing than a searcher - and if the strategic is large enough, financing / capital may not require much effort.

Reply by an intermediary
from Vanderbilt University in Chicago, IL, USA

Thanks, Luke. I agree with most of the comment here. Do not take it personally. There are deals that are well suited for searchers and deals that are not. M&A is not a one size fits all, and if the broker is telling you that this is geared toward a strategic, then it is almost assuradly not a good fit and you should save your time, energy, and attention and move on. They did you a favor by not wasting your time. There is no shortage of companies out there elsewhere. Good luck in your search.

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