Strategic Buyout

Written By
Paul Tracy
Updated June 14, 2021

What is a Strategic Buyout?

A strategic buyout is a merger wherein one company acquires another based on the belief that the synergy of their combined operational capabilities will generate higher profits than if the two had remained independent.

How Does a Strategic Buyout Work?

In many cases, the operating abilities of one company will complement those of an acquiring company in such a way that, if combined, the operational capacity of the two could generate substantially higher profits. The acquiring company will purchase the target company, even at an otherwise irrational price, provided that the acquiring company will increase profit potential.

Why Does a Strategic Buyout Matter?

Strategic buyouts are as beneficial for the target company as for the acquiring party because both enjoy the higher profit realized from combined operations and economies of scale.

Activate your free account to unlock our most valuable savings and money-making tips
  • 100% FREE
  • Exclusive money-making tips before we post them to the live site
  • Weekly insights and analysis from our financial experts
  • Free Report - 25 Ways to Save Hundreds on Your Monthly Expenses
  • Free Report - Eliminate Credit Card Debt with these 10 Simple Tricks
Ask an Expert
All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Strategic Buyout.
Be the first to ask a question

If you have a question about Strategic Buyout, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

If you have a question about Strategic Buyout, then please ask Paul.

Ask a question Read more from Paul
Paul Tracy - profile
Ask an Expert about Strategic Buyout

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms