Midmarket Buyers – acquisition criteria

Understanding Buyer Types in Midmarket Business Acquisitions

When selling a midmarket business, knowing who your potential buyers are—and how they think—can make all the difference. Each buyer type brings a unique approach, risk profile, and set of expectations to the table. Here’s a quick guide to help you navigate the landscape.

Private Equity & Funds

• Goal: Double earnings in 3–7 years and prepare for similar growth when on-selling to the next (PE) owner, this is how they maximise their returns by increasing the valuation multiples when they exit. Will focus on and explore growth opportunities.
• Approach: Fast reviews, focus on cost-cutting and possibility of leveraging assets for debt funding. Look for cornerstone or bolt-on acquisitions. Bolt-on’s are more straightforward due to industry knowledge and management expertise.
• Risk Appetite: Moderate to high; varies by firm.

Strategic Buyers

• Goal: Expand into new markets, acquire new customers, or fill product gaps.
• Approach: Seek synergies, may integrate or keep the business standalone. Generally understand what they are looking for, knowledgeable about the business, its operations and the market opportunity.
• Risk Appetite: Moderate; value driven by synergy opportunities.

Competitors

• Goal: Remove competition, acquire customers, and accelerate growth.
• Approach: Typically integrate acquisitions into existing operations. Familiar with industry valuation and pricing expectations.
• Risk Appetite: Moderate to high; aggressive growth focus.

Family Companies

• Goal: Long-term growth, often through bolt-on acquisitions.
• Approach: Quick decisions, leverage family expertise. Utilise knowledge, experience, skills and expertise developed over multiple successful investments. Good understanding of target businesses and earnings drivers.
• Risk Appetite: Moderate; patient capital.

Financial Investors

• Goal: Purely financial returns, often industry-agnostic.
• Approach: Invest where strong management is in place. Can have limited industry knowledge and familiarity with specific business operations, markets and earnings drivers.
• Risk Appetite: Low to moderate; prefer lower-risk, stable businesses.

Syndicate Buyers

• Goal: Bargain acquisitions with stable earnings, sufficiently attractive to interest a wide spectrum of syndicate members.
• Approach: Detailed analysis, slow decision-making due to group dynamics. Can have limited industry knowledge and familiarity with specific business operations, markets and earnings drivers and rely on and sector subject matter specialists.
• Risk Appetite: Low; process can be lengthy and uncertain.

Management Buyouts

• Goal: Managers acquire the business they run.
• Approach: Often a long process, focused on securing funding (typically a mix of vendor finance and bank debt) and risk management. Very knowledgeable about the business, the market and risks. May not be strongly financial but understand the opportunity and are often strongly motivated to acquire.
• Risk Appetite: Varies; depends on management’s experience and resources. Providing suitable security for funding is a major hurdle.

Key Takeaways: Buyer Types in Midmarket Business Acquisitions

• Midmarket acquisitions attract a variety of buyer types, each with their own goals, strategies, and risk profiles.
• Buyers—including private equity, strategic buyers, competitors, family companies, financial investors, syndicate buyers, and management buyouts—approach opportunities differently, from seeking rapid growth and integration to prioritizing stability and thorough analysis.
• Sellers should anticipate diverse negotiation styles, due diligence requirements, and integration plans depending on the buyer type.
• Understanding these differences helps sellers understand and be prepared for buyer expectations and to support a smoother, more certain and less stressful transaction.