Question

What is the difference between a financial buyer and a strategic buyer? For example, in the...

What is the difference between a financial buyer and a strategic buyer? For example, in the acquisition of Kraft, was Philip Morris a financial or a strategic buyer? In the acquisition of Carters, was Berkshire Partners a financial or a strategic buyer?

Homework Answers

Answer #1

A financial buyer acquires a business for the potential cash flows it can generate, and its growth prospects. They are interest in buying businesses for cheap, driving up their value by driving efficiencies/scaling/turnarounds, and then selling them later for a higher price.

A strategic buyer acquires a business for the strategic value that the business brings to the acquirer's existing business. They are less interested in quick returns or cash flows. They are more interested in synergies and strategic fit.

In the acquisition of Kraft, Philip Morris was a strategic buyer

In the acquisition of Carters, Berkshire Partners was a financial buyer

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