Why might companies acquired by strategic buyers expect to receive higher premiums?

Companies acquired by strategic buyers often expect to receive higher premiums because strategic buyers typically can realize synergies that financial buyers do not. Strategic buyers are usually companies within the same industry or a related sector that can leverage the acquisition to improve their existing operations or expand their market reach. These synergies might include cost savings through economies of scale, enhanced revenue opportunities by combining product lines, or other operational efficiencies that arise from integrating the acquired company into their existing framework.

Unlike financial buyers, such as private equity firms, who are primarily focused on financial metrics and returns on investment over a set period, strategic buyers often have a longer-term vision that includes operational integrations and strategic growth. This capability to generate additional value through synergies allows strategic buyers to justify paying a higher price for a target company, leading to the expectation of receiving higher premiums in acquisitions.