A corporate investor is an incorporated company that chooses to invest in another company.
A corporate investor is an incorporated company that chooses to invest in another company. In some cases, the underlying objective of the investment goes beyond simply acquiring a stake in the company to taking control of the business. This means that a corporate investor can be seen as friendly and welcome by business owners, or as an intruder intent on taking control of the business by any legal means possible.
In many cases, a corporate investor is simply looking for a way to generate additional income using cash reserves already available. When that is the case, the investor will buy available shares of a company that shows promise in increasing its business volume and experiencing some kind of appreciation of its shares. With this type of investment strategy, the corporate investor has no interest in taking control of the company; instead, the focus is on achieving a consistent return on investment, thanks to responsible management by the owners and leaders of the company in which the investment is made.
At other times, the corporate investor’s objective is to gradually gain control of a business, buying shares when and as they become available. This approach can be employed for a number of different reasons. The idea may be to acquire a company that produces goods and services needed by the investor to promote its own production of goods and services, and possibly obtain these necessary materials at lower prices. Such an investment strategy may also have the objective of acquiring a competitor as a means of increasing market share and eliminating competition in the market. There is even the possibility that the investor simply wants to acquire the company and then dismantle it, selling its assets as a way of making a profit.
The reasons for the investment will often dictate the criteria used to target companies as investment opportunities. For example, if the corporate investor’s objective is to acquire shares and generate returns on those holdings over the long term, the investor is likely to focus on businesses that are likely to remain industry leaders for many years to come. If the goal involves eventual control, the investor will generally target companies that need an inflow of cash and have investors willing to sell their shares at a decent rate. While there is always some risk involved in any type of investment activity, careful planning ahead will help to minimize the risk and increase the chances for the corporate investor to achieve the desired outcome.