The 4 Types of Buyers in M&A—And What They’re Looking For

When it comes to selling your business, understanding the different types of buyers can make or break your deal. Every buyer has unique motivations, risk tolerance, and deal structures, which impact not only how much they’re willing to pay but also the future of your company post-sale.

For founders considering an exit, it’s crucial to identify the right buyer fit—one that aligns with your financial goals, company culture, and legacy.

At Merge, we help sellers navigate the M&A landscape by connecting them with the right buyers and structuring deals that maximize value. This guide breaks down the four main types of buyers in M&A—strategic buyers, private equity firms, search funds, and individual investors—so you can understand who they are, what they’re looking for, and how to attract them.

1. Strategic Buyers: Companies Looking to Expand and Integrate

Strategic buyers are existing businesses looking to acquire another company to enhance their own growth, expand capabilities, or enter new markets. These buyers often include competitors, complementary service providers, or large corporations wanting to vertically integrate.

Strategic buyers don’t always pay the highest multiple since they often fund acquisitions with cash from their balance sheet, rather than outside capital. However, they bring valuable industry knowledge, making them more effective at integrating the acquired business and retaining key talent. They also understand the importance of human capital, making them strong stewards of an agency’s culture and people.

What strategic buyers are looking for:

• Businesses that allow them to expand into new markets, service areas, or customer segments
• Complementary capabilities, such as an agency with expertise in a niche they want to serve
• Teams with specialized skills that would be difficult to build in-house
• Operational efficiencies that allow them to cut redundant costs while expanding their offering

Typical deal structure with a strategic buyer:

• Often offers cash up front, though less likely to include aggressive valuation multiples
• Usually requires a transition period for the seller to ensure smooth integration
• Often provides the most seamless post-acquisition experience for employees and clients

Strategic buyers are a great fit for owners who want their agency to be absorbed into a larger, more established business that understands how to operate and grow within the industry.

2. Private Equity Firms: Financial Buyers Focused on Growth and Returns

Private equity firms are investment groups that acquire businesses with the goal of increasing value and eventually selling for a profit. They typically hold a company for three to seven years before exiting.

Private equity buyers generally pay higher multiples than strategic buyers because they have access to institutional capital. However, they are financially focused, meaning they look for businesses with predictable revenue, strong margins, and opportunities to scale.

What private equity buyers are looking for:

• Companies with strong EBITDA margins and a clear path to growth
• Businesses with recurring revenue or long-term contracts that create stability
• A leadership team that can stay on post-acquisition to drive continued growth
• Acquisition targets that can be combined with other portfolio businesses to create synergies

Typical deal structure with private equity buyers:

• Many deals include an equity rollover, where the seller retains 20–40% ownership to benefit from future growth
• Deals are often funded using a mix of equity and debt
• Sellers who stay on post-sale are typically rewarded with performance incentives

Private equity buyers are a great fit for owners who want to take some chips off the table while continuing to grow their agency with a financial partner.

3. Search Funds: First-Time CEOs Looking to Buy and Operate a Business

Search funds are created by individual entrepreneurs who raise capital from investors to acquire and operate a small business. Unlike strategic buyers and private equity firms, search fund buyers actively manage the business post-acquisition rather than just investing in it.

Search fund buyers are typically first-time CEOs who are leaving careers in consulting, finance, or corporate leadership. They seek businesses that are profitable, but small enough for them to manage directly.

What search fund buyers are looking for:

• Stable, profitable businesses with predictable revenue streams
• Owners who are ready for a full exit and willing to train the new operator
• Service-based businesses with strong customer relationships
• Simple operations that don’t require deep technical expertise

Typical deal structure with search funds:

• Most deals are full buyouts, with the owner transitioning out over a period of six to 12 months
• Seller financing is common to reduce risk for the buyer
• Many search fund deals rely on SBA-backed loans to finance the acquisition

Search funds are a great fit for owners who are looking for a complete transition and are comfortable selling to a first-time operator rather than an experienced industry buyer.

4. Individual Investors: Buyers Seeking a Business to Own and Operate

Individual investors range from experienced executives leaving corporate jobs to first-time buyers looking to acquire their own business. These buyers typically fund acquisitions using a mix of personal savings, SBA loans, and small investor groups.

Unlike search funds, which involve multiple backers, individual buyers are typically investing their own capital and looking for a long-term business to run. They often target businesses that are small enough to be owner-operated.

What individual buyers are looking for:

• Businesses with stable revenue and strong profit margins
• Companies that don’t require an extensive team to manage
• Industries that match their expertise or personal interest
• Affordable acquisition prices, typically under $5 million in enterprise value

Typical deal structure with individual buyers:

• SBA-backed loans are commonly used to cover 80–90% of the purchase price
• Seller financing is often required to bridge funding gaps
• Full buyouts with a short transition period for training

Individual buyers are a great fit for owners of smaller agencies who want a quick and clean exit while ensuring their business goes to someone who will continue to nurture it.

Choosing the Right Buyer for Your Business

Every type of buyer has different motivations and deal structures, so choosing the right fit comes down to the seller’s priorities.

• If you want a buyer who understands how to run an agency and values your team, a strategic buyer may be the best fit.
• If you want to stay involved and grow with a financial partner, private equity could be a strong option.
• If you’re looking for a full exit and want to sell to an up-and-coming entrepreneur, a search fund buyer might be the right fit.
• If your agency is on the smaller side and you want a clean break, an individual investor may be the best path forward.

At Merge, we specialize in helping sellers find the right buyer and structure deals that maximize value while ensuring a smooth transition. If you’re considering selling your agency, reach out today to explore your options.