This page is for the founder of an established company in Miami or South Florida who has interest from buyers, or expects it, and has to decide which kind to pursue before a letter of intent. Here "buyer" always means the acquirer of your company. Whether to sell at all is covered in sell or scale, and how much of the company to sell to a private equity firm in our guide to minority and majority stakes.
What are the main kinds of buyer?
A strategic buyer is an operating company in your industry or a neighboring one. It usually wants to combine your business with its own operations, for your customer relationships or for a capability that would take it years to build.
A financial buyer, in this comparison, is a private equity firm investing to grow a company's value and sell its investment later. The SEC's Investor.gov guide to private equity funds describes a typical strategy as taking a controlling interest in an operating company and engaging actively in its management. A firm that already owns a business in your industry can behave partly like a strategic buyer when it buys yours as an add-on to that business.
An individual buyer usually plans to run the business personally. A holding-company buyer may keep your managers in place or appoint a new leader, so ask early who will operate the company and whether it will stay a separate business. A sale to your own managers is a separate route, covered in our business succession planning guide.
How do the buyer types compare for the founder?
Use these patterns to prepare your questions before you discuss an offer. They are common features, payment structures overlap across buyer types, and the documents decide what each party agrees to.
| For the founder | Strategic buyer | Private equity firm | Individual or holding-company buyer |
|---|---|---|---|
| Why it buys | Usually to combine your business with its own | Usually to grow the company's value and sell later | Usually to own and run the company |
| How much it usually buys | Usually the whole company | Usually control, often with some founder equity kept | Usually the whole company |
| How it may pay | Cash or its own shares, sometimes with deferred or conditional payments | Cash, often with a requirement or option to reinvest part of your proceeds in equity | Cash, sometimes with part of the price paid over time through a seller note |
| What happens to the company | Often folded into the buyer's operations | Kept as its own business or combined with one the firm already owns | Usually kept running as its own business |
| What happens to your team | Roles that overlap with the buyer's may be combined | Management may stay, with more reporting, or change as part of the firm's plan | The team may stay, so ask who will lead it and what will change |
| Your role after closing | Often a defined transition period | Often a continuing management role | Usually a handover to the new owner |
| What its plan may emphasize | Often operating fit and how the companies combine | Often the quality of earnings and the depth of management | Often cash flow and how much the company depends on you |
Will a strategic buyer pay more than private equity?
A strategic buyer may be able to justify a higher price when combining the companies creates savings or added revenue it can count on. A private equity firm can still compete, especially when your company fits a business it already owns. The buyer's label does not settle the price.
Compare the cash at closing with the payments that depend on later conditions, then look at the equity you keep and the conditions to closing. A larger headline offer can leave more of your proceeds depending on future results or on decisions the new owner controls. If a payment depends on later results, have your attorney examine how those results are defined and who makes the decisions that affect them. Your tax adviser should assess what each structure means for you.
What happens to your people and your company's name?
A strategic buyer combining two companies often merges overlapping roles and may fold your brand into its own. If the buyer is a competitor, it may already employ people doing the same work as yours. Ask which functions it expects to combine and who will make those decisions.
A private equity firm buying your company as its own business often keeps the name and the management, and adds reporting and a growth plan. A firm buying it to join a business it already owns may combine teams and change the leadership, much as a strategic buyer would. An individual buyer who runs the company usually keeps the team and becomes its leader.
Ask every buyer which positions may change, whether employees would move to new employment terms, and what it plans for pay, benefits and work locations. Include the company name if keeping it matters to you. A plan for the team is different from a commitment the agreement secures, so have your attorney explain what the buyer can be bound to after closing and whether any notice obligations apply to employee changes.
Is it risky to talk to a competitor about selling?
Yes. During diligence a competitor can learn about your customers and your pricing, and then decide not to buy. A confidentiality agreement and a staged disclosure process reduce that exposure, and information already shared can still cause harm.
Staff of the Federal Trade Commission's Bureau of Competition, in their guidance on avoiding antitrust pitfalls during due diligence, advise the selling side to share the least information each stage needs. For competitively sensitive information such as pricing, costs and plans, they describe safeguards such as clean teams, where access is limited to named people who do not work on pricing or strategy.
Have your own attorney review the confidentiality agreement and approve the disclosure process before anything is shared. Ask which sensitive details may be disclosed at all, to whom, and whether access to customer and employee information should be restricted to a clean team or to the buyer's outside advisers.
We would settle that sequence before answering detailed requests. Interest from a competitor you know well can make the conversation feel comfortable before either side has agreed how information will be handled.
Which buyer fits what you want after closing?
Start from the outcome and test each offer against it, because the buyer's label only tells you what is common. If you want to sell all of your ownership and be paid at closing, a strategic buyer often proposes a full sale, and any kind of buyer may still ask you to stay for a period or make part of the price depend on later results. Read each proposal's payment terms and transition requirements before you favor it.
Cash now with a stake in a later sale is what a private equity majority sale with rollover offers, meaning you keep or reinvest part of your ownership after closing. Ask whether the rollover is required, and whether your company would run as its own business or join one the firm already owns. You usually keep working in the business too, and that role needs its own agreed authority and length, which our guide to staying on after selling covers.
If you want the company kept intact under an owner who runs it, ask each buyer directly whether that is its plan and who will lead. An individual buyer is the most likely to say yes, and may ask you to finance part of the price through a seller note, where part of the price is paid over time. Have your own attorney examine the repayment obligation, any security for it and how other lenders' rights could affect you if the buyer defaults, and ask your tax adviser about the tax treatment.
If you want to stay in control, you are weighing a partial sale, which our guide to minority and majority stakes covers with the investor rights that come with it.
How should you compare offers from different kinds of buyer?
Put every offer on the same comparison sheet, and keep the unanswered points visible so an attractive headline price cannot hide an open commitment.
- Cash payable at closing.
- Payments that depend on later conditions, and who controls those conditions.
- Equity you keep and the rights attached to it.
- Your role after closing and how long it lasts.
- Commitments about your team.
- How the buyer is funding the price, and what still has to happen before closing.
Ask who must approve the purchase on the buyer's side and whether any lender or other investor still has to commit. When an answer changes during discussions, update the sheet and check whether the offer still meets what you wrote down. Have your advisers review the sheet before you favor an offer or sign a letter of intent, and ask your attorney which provisions of that letter would bind you.
An adviser can approach several kinds of buyer at once, and our guide to choosing a business broker or M&A adviser covers that choice. What buyers examine in diligence is set out in our exit readiness guide. Carlos's own line from his banking years holds for every kind of buyer: "Your valuation scales only when your absence doesn't threaten the business."
What should a founder do this quarter?
- Write down the exit you want. Note the role you want after closing and how much of the price you are prepared to wait for, then mark any commitment to your team that would decide the matter for you.
- Build the comparison sheet. Set up the headings above before the first offer arrives, so every buyer is measured the same way.
- Agree the disclosure stages. Settle confidentiality with your attorney before sharing anything, with a separate decision on when a competitor may see sensitive details.
- Ask who will run the company. Ask each buyer who will lead after closing and whether its proposal depends on you staying.
- Start with what you want after closing, then compare each buyer's written proposal.
- A strategic buyer may justify a higher price when combining creates savings, and a private equity firm can still compete for the same company.
- Ask every buyer for its plan for your team and your company's name before you favor an offer.
- Talking to a competitor carries information risk even when no sale follows, so agree the disclosure process with your attorney first.
- Compare payment conditions and the equity you keep alongside the role you are agreeing to.
The Leadership Scorecard takes ten minutes and shows which parts of the company still depend on you, which every kind of buyer asks about.