What Are Strategic Assets?
Why Do They Matter?
An acquisition based on "strategic value" nearly always commands a significantly higher price, because it provides several sources of return on investment, not just one. Strategic value exists when the seller brings specific strategic assets to the buyer that will increase both the buyer's and the seller’s earnings. A partial list of strategic assets includes the following:
- Market strength in a geographical area where the buyer is weak or absent;
- Product offerings that complement those of the buyer and, therefore, create
the potential for profitable cross-selling;
- Service offerings, such as field technical support, that can make the buyer's
product offerings more appealing and competitive;
- Market strength in a niche that the buyer has been unable to penetrate;
- Key customers that the buyer covets;
- Marketing channel, such as a unique or especially productive distribution network,
that can present the buyer's products and services to an entirely new class of
customers;
- Strategic alliance(s) and/or joint venture(s) that are transferable to the buyer;
- Potential acquisition hub, especially if the seller has an outstanding reputation
in its industry;
- Technology/technologists that can help make the buyer more productive;
- Broad and deep management team that reduces the buyer's risk and provides a
potential pool of executive talent for the buyer;
- Modern management style and/or technique, such as a flat organization, that has interested the buyer, but has appeared too risky to undertake without experienced, industry-savvy assistance.
Each of these seller assets has the potential to increase the buyer's sales and gross profit or reduce the buyer's costs and, thereby, deliver a significant return on investment from the acquisition - separate and distinct from the seller's own earnings.
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