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M&A Investors: Institutions versus Individuals

Most often, Buyers of middle and lower middle market companies in an M&A transaction are institutions (PE firms or strategic Buyers). Individuals can certainly buy these companies, but due to the size of the companies and the amount of money needed to buy them, individuals buying companies in these markets are somewhat rare.

Individuals seeking to acquire a company may be little more than dreamers with no money. Sellers should take appropriate steps to ensure individual Buyers can back a transaction.

Institutions usually have more money than individuals, greater access to other sources of capital, and a certain level of sophistication as compared to most individuals. The executives at a company or PE firm probably have more experience doing deals, more experience running a business, and greater financial acumen than an individual. Not always, of course, but usually.

Note, however, that a wealthy individual may be able to act more quickly than a company. An individual Buyer has far less bureaucratic red tape than an institutional investor Buyer.

An important distinction is an executive backed by a private equity firm, a situation that’s really closer to a PE Buyer than an individual Buyer. In this case, the individual essentially has the financing lined up and is simply seeking the right acquisition.

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M&A Valuation: Measures of Return
Inventory Carrying Valuation Methods
Banker Involvement in M&A Deals
M&A Letter of Intent: Financing Contingency
M&A Financing: Paying for a Company with Stock
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