The quality of management, the rate of the introduction of new products, the success or failure of marketing strategies, the level of customer satisfaction, the education of the workforce – all depend on the strategic investor. That there is a strong relationship between the quality and decisions of the strategic investor and the share price is small wonder. Gradually, the balance between strategic investors and financial investors is shifting in favor of the latter.
Thus, two classes of investors emerged. One type supplied firms with capital. The other type supplied them with know-how, technology, management skills, marketing techniques, intellectual property, clientele and a vision, a sense of direction.
In the not so distant past, there was little difference between strategic and financial investors. Investors of all colors sought to safeguard their investment by taking over as many management functions as they could.
A single investor (or a small group of investors) could no longer accommodate the needs even of a single firm. Actually separate businesses of money making and business management emerged. An investor was expected to excel in obtaining high yields on his capital – not in industrial management or in marketing.
The financial investor has little interest in the company’s management. His interpretation of the rolls and functions of “good management” are very different to that offered by the strategic investor. The financial investor is satisfied with a management team which maximizes value.
In many cases, the strategic investor also provided the necessary funding. Venture capital and risk capital funds, for instance, are purely financial investors.
A single investor (or a small group of investors) could no longer accommodate the needs even of a single firm. The financial investor has little interest in the company’s management. The financial investor is satisfied with a management team which maximizes value. The quality of management, the rate of the introduction of new products, the success or failure of marketing strategies, the level of customer satisfaction, the education of the workforce – all depend on the strategic investor. Gradually, the balance between strategic investors and financial investors is shifting in favor of the latter.
