In small business M&A, buyers generally fall into two categories — strategic and financial — and their motivations directly shape deal terms, valuation, and post-closing outcomes.

Strategic buyers are operating companies seeking synergies. For example, a manufacturer might buy a competitor to gain market share or purchase a supplier to secure its supply chain. They often value the target based on strategic benefits, which can justify paying a higher multiple of EBITDA than purely financial returns would suggest. But with that premium may come faster integration and possible redundancy eliminations.

Financial buyers — such as private equity firms, family offices, or search funds — focus on return on investment. They assess a business primarily on its ability to generate cash flow and grow. They may pay a multiple based on market norms for the industry (e.g., 4×–6× EBITDA for smaller companies), but they’re less likely to stretch for strategic synergies. Many will use leverage (borrowed funds) to complete the purchase, which can influence deal structure.

Why it matters: If you’re selling to a strategic buyer, highlight competitive advantages, proprietary processes, or market position. For financial buyers, focus on recurring revenue, steady margins, and growth potential. If you’re buying, understanding which camp your competition falls into will help you predict how aggressively they’ll bid.

Knowing the buyer type allows you to shape your narrative, pricing expectations, and negotiation strategy for maximum leverage.  We would love to chat more – feel free to reach out at your convenience.