
Strategic vs. Financial Buyers of Lower Middle Market Companies
Strategic buyers (operating companies) buy lower middle market businesses for synergies, so they often justify higher multiples and prefer cleaner, cash-heavy structures—but typically integrate hard, which can change leadership, brand, and headcount. Financial buyers (PE, family offices, independent sponsors) underwrite standalone cash flow and a 5–7 year exit, so they more often structure deals as cash + rollover equity (and sometimes earnouts), keeping management in place so the seller can get a “second bite” on the eventual resale.



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