Investing, also called buying into a business, comes in many forms. We look at investing in an existing business from the buyer's and the seller's point of view. But who are these investors?
Investing in an existing business can be done from different roles, each with its own reason and purpose. You can invest as an investor, as a (potential) entrepreneur, or as a business.
Types of investors
Investing as an (aspiring) entrepreneurInvestingas an aspiring entrepreneur is called a management buy-in.
Through a management buy-in, someone from outside the business buys an equity stake. The classic MBI candidate is often a (former) manager of a listed or large company. He or she is done with the many meetings, the cumbersome decision-making process and the lack of entrepreneurship within a large organization and wants to be at the helm himself. But starting for himself by setting up a business from scratch is not for him. For him, buying a business is an ideal "flying start. These managers often have the necessary resources in the form of a golden handshake or an extra mortgage on their house to take over (part of) a business.
In recent years, a new group within MBI'ers has emerged: former entrepreneurs who have successfully sold a business. Often these are relatively young entrepreneurs who put their businesses on display after a few good years, such as during the Internet boom. but after a lull, the entrepreneurial blood plays up again and they buy a business, to feel the excitement of entrepreneurship again. This category is close to an investor, with the main difference being that this ex-entrepreneur is actively and operationally involved in the business he buys into.
Investing as businesses 2.
The second type of investment is in an existing business. This may be a direct competitor or an industry foreign business or financial party and is often called a strategic acquisition.
A business may be an interesting acquisition target for a competitor. This investor wants to strengthen its own market position by acquiring a share interest in another business because that other company has developed a new technology, to offer customers a wider range of products or to negotiate a higher discount for a larger purchase volume.
For an industry foreign business, entering a new market sometimes has high barriers to entry. A smart way to still gain access to that market is to partially buy a business in that industry, whether through a buy-and-build strategy or not. The buying company then does not have to fight for customers, revenue and a piece of market share, but buys an already "moving train.
A financial party is often an investment company; this participant is not likely to run the business itself. Therefore, these types of deals often go in combination with a business acquisition in the form of a management buy-in/management buy-out or the investment company itself comes up with an MBI candidate or MBO candidate. This entrepreneur is then the guy running tent, the investor advises him in the background.
3. Investing as an investor
In small and medium-sized enterprises (SMEs), it is mostly informal investors or investment companies that invest in existing businesses.
Informal investors are generally wealthy former entrepreneurs who have made their money by (partially) selling their businesses. They become co-owners by buying part of the shares or by providing a subordinated loan (often a combination of both). There are an estimated five thousand informals in the Netherlands, especially in the start-up and early growth phase(seed and early stage) of a business. The amounts involved are generally between 50,000 and 250,000 euros. Besides money, informal investors also contribute their knowledge and experience and make their personal network available to the entrepreneur.
Investment companies (also called venture capitalists or private equity ) have much more money available for investment than informal investors. A few hundred million euros per fund is the rule. There are some 300 private equity firms in the Netherlands that manage the assets of large private investors and investment funds, with whom they make concrete agreements on returns to be achieved, target groups, selection criteria and decision-making.
