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How Do I Choose the Best Strategic Investment?

Geri Terzo
By Geri Terzo
Updated May 17, 2024
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When a company acquires another business or asset that is in the same industry or line of business that the acquiring entity is in, the deal is known as being strategic. Often, a strategic investment involves the acquisition of another business that might have just as much interest in being a buyer as it would being the takeover target. It may require hiring a third-party consultant or financial representative, such as an investment banker, to uncover the most appropriate strategic investment for a firm.

Given the possibility that a strategic investment target is one that translates into a competing business, hiring a third-party consultant to perform research may help you to uncover the best opportunity. In doing so, the investor keeps its interests closely held to the vest while at the same time learning the types of business partnerships a potential target is interested in pursuing. This method might lead to one ideal investment opportunity or perhaps piece together several that, combined, create the best acquisition.

You may want to consider a strategic investment in a new start-up business. Upon uncovering a growing company that is still in its early stages, you create an opportunity to share in the upside potential. A strategic business would be one that has a similar business to yours but perhaps offers some new technology or product that would bolster your own company's profits even more. Another benefit is that it could help to contain future competition shaping up in the industry. A possible pitfall is the chance that the nascent business will not integrate well with yours, but that risk surrounds any combination.

An overseas acquisition may be the best strategic investment. By acquiring an international business or assets, you may gain exposure to a region in which you previously had no ties. In creating a partnership or combined entity in a different country, you also acquire the expertise that the local entity has in doing business in that nation. The result could be tapping into new clients and revenue streams that will increase the influence that you have overseas.

Just because a company goes through a downturn or slowdown does not mean there is not a sound business model or the potential for greater fundamental growth. The best strategic acquisition may be found in a business that experienced some type of setback and may be facing financial difficulties. In making this acquisition, your business may get a bargain and in the end reap rewarding dividends.

WiseGEEK is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

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