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The Financial Investor, Strategic Investor - What Type Of Investor Will Benefit You And Your Independent Business?
In the not so distant past, there was little difference between strategic and financial investors. Investors of all types sought to safeguard their own investment by taking over as many management functions as they could.
Also, investments were small and shareholders few. A firm resembled a household and the number of people involved - in ownership and in management - was correspondingly limited. People invested in industries they were acquainted with first hand.
As markets progressed, the scales of industrial production (and of service provision) improved. A single investor (or perhaps a small group of investors) could no longer support the needs even of a single firm.
As knowledge improved and specialization ensued - it was no longer feasible or possible to micro-manage a firm one invested in. Actually, separate businesses of money making and business management emerged.
An investor was expected to excel in obtaining high yields on his investment capital - not in industrial management or in marketing and advertising. A manager was required to manage, not to be capable of personally tackling the numerous and varying tasks of the company that he managed.
Thus, two classes of investors emerged. One type supplied firms with capital. The other type supplied them with know-how, technology, management skills, marketing techniques, intellectual property, clientele and a vision, a sense of direction.
On many occasions, the strategic investor also supplied the required funding. But, more and more, a separation was actually maintained. Venture capital and risk capital funds, for example, are purely financial investors. So are investment banks and other financial institutions.
The financial investor represents the past. Its funds is the result of past - right and wrong - choices. Its orientation is in short: an "exit strategy". This really is sought as soon as possible.
Exit strategies bring fast profits. The stock exchange is actually a popular exit strategy. The financial investor is always on the lookout, searching for willing buyers for his stake.
The financial investor has little interest in the company's management. Optimally, his money buys for him not only a fantastic product and a superior market, but additionally great management. But his understanding of the rolls and functions of "good management" are very different to that offered by the strategic investor.
If you're on the lookout for a financial investor, and you're on the verge of seeking bankruptcy services or corporate debt restructuring, contact a business consultant for help. The act of restructuring a company will be a lot easier for you when you have professional help.
The strategic investor, alternatively, represents the real long term accumulator of value. Paradoxically, it's the strategic investor that has the greater influence on the value of the company's shares.
The type of management, the rate of the introduction of new goods, the success or failure of marketing and advertising strategies, the degree of consumer satisfaction, the training of the workforce - all depend on the strategic investor.
Indeed, gradually, the balance between financial investors and strategic investors is shifting in favor of the latter.
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