A strategic buyout is the purchase of a firm by another firm in order to gain some operational benefit which will lead to increased earnings. If Company A, which produces toothpaste, buys Company B, which owns toothpaste tubing and packaging factories, the combination of the two companies’ operational forces means that Company A can now produce their whole product more cheaply than before. Before the buyout, Company B was charging Company A a lot for tubing and packaging, but now because they are the same company, there is no charge.