Strategic investor. Terms and Purposes.

We continue this topic, and today we will analyze another tactic of investors, namely, strategic investment. Accordingly, those who have chosen this path are named.

When investing strategically, the goals set differ from the tactics of portfolio investment. But, before starting to study all these nuances, let's define the basic terms.

Strategic investor. Terms and Purposes.

Strategic investor, who can also be called an active investor, invests in the purchase of a large block of shares at once, with the right to participate in the management of the company itself. Better yet, gaining full control over it by purchasing a controlling stake (50% + 1 share).

In fact, this is the most risky type of investment, due to its low. After all, an investor immediately invests a large amount of his money capital, and sometimes all his capital, in one financial instrument and source of income. That is why this type of investment requires an extremely high level of preparation, not only the level of knowledge of the investor himself, but also preparation for each transaction, verification of documents, quality of legal support, and so on.

A strategic investor, it can be a simple individual, but also, often large transnational corporations that specialize in certain industries become them. In this case, the objects of strategic investment are smaller regional companies in the same or related industry.

Investment objectives

I think what a strategic investor is and who they might be, everything is clear.
There are no difficulties here. Now let's move on to the main issue - the goals of strategic investment.

The object of investment is a company whose shares are being redeemed, receives a large amount of cash finance to complete its tasks. Often - advanced technologies, an effective management or management system. And what does the investor himself get?

Strategic investor, first of all, gains control over the company's management. This is a very important point, because all the work is being done for this. Having received control, now he decides what products he will produce, in which regions to represent him, what technologies to use, and so on.

This is necessary when a given investor already has a business in the same industry sector. By purchasing a controlling stake, he simply expands the sales market for his products, increases the volume of his own sales. Along the way, reducing production costs, and expanding the range of products.

A separate article is the goal of buying a controlling stake in order to eliminate a potential competitor. Here, depending on the circumstances, either they actually use the potential of the purchased asset, or simply close its capacity and dissolve the team.

What is the bottom line we have.

As you can see, the goals of strategic investing are very different from.
A striking example of the actions of strategic investors is the entry into the Russian market of such world giants as Nestlé and Procter & Gamble. Using their financial resources, they bought out local small businesses, quickly increased production of their products, and introduced advanced marketing and sales technologies. As a result, they occupy dominant positions in their industrial sectors.