Within the not so distant past, there was little difference between financial and strategic investors. Investors of all colors sought to safeguard their investment by taking over as many management capabilities as they could.
Also, investments were small-scale and shareholders few. A firm resembled a household and the quantity of folks involved - in ownership and in management - was correspondingly limited. Folks invested in industries they were acquainted with first hand.
As markets expanded, the scales of industrial production (and of service provision) expanded. A single investor (or a small group of investors) could no longer accommodate the needs even of a single firm.
As knowledge improved and specialization ensued - it was no longer feasible or possible to micro-manage a firm one invested in. In fact, separate businesses of money generating and business management surfaced.
An investor was expected to excel in obtaining high yields on his funds - not in industrial management or in marketing. A manager was expected to manage, not to be capable of personally tackling the various and varying tasks of the company that he managed.
Thus, two classes of investors surfaced. One type supplied firms with capital. The other kind supplied them with know-how, technology, management skills, marketing and advertising techniques, intellectual