What’s the Difference Between Buy Side and Sell Side?

Discover the opportunities and earning potential for investors and specialists, and get insights into common M&A analyst interview questions and answers. Schroders, a global investment sell side vs buy side investment banking manager, manages a range of active funds that invest across various asset classes and regions. This initial offering of debt and equity is often referred to as the ‘primary market’ as it is the first time this type of debt or equity has been traded. Once these new issues are complete, the bonds or shares can be traded on the ‘secondary market’. An initial public offering (IPO) or float is where a company (i.e. one that is not listed) raises money by offering its shares to the public for the first time. On the other hand, if you are on the buy-side, what you do is use capital to purchase these securities or companies that are for sale.

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Normally, organizations get close enough to services or markets that would be harder to reach without the acquisition. For example, if an M&A advisor works on both the sell-side and buy-side of M&A, it is possible that mixed buy-side and sell-side relationships could create conflicts of interest. In short, they may not drive a competitive process ending in the best outcome for the seller. Clients’ money is pooled into funds which are invested in various asset classes and run by defined strategies. VDR analytics tools help the https://www.xcritical.com/ sell-side to gain insights into buyer behavior, document engagement, and other areas of interest. This information can inform strategic decisions and optimize the presentation of key assets during negotiations.

Advantages of Data in Sell-Side M&A

The salary is similar to that of most investment banking gigs, with compensation coming to approximately $80k. They work in equity research, commercial banking, corporate banking or sales, and trading. It is because you have to familiarize yourself with the product or business. Much of it comes down to preparation for the process, both for engaging potential buyers as well as preparing documents and marketing materials when potential buyers have been identified. In either case, buyers are looking for a strategic benefit or return on investment when approaching an M&A process.

• Our buy-side clients use our platform to access the same sell-side research they already have entitlements to.
• Sell-side means investment bankers work on engagement where their client is a seller.
• On the sell side, institutions typically involved include board investors, investment banks, underwriters, brokerage firms and advisory firms.
• However, it’s important to note that the relationship between the two sides can also lead to potential conflicts of interest.
• The term on the buy side in the realm of investment banking refers to the side that is dedicated to the acquisition of securities for purposes of investment.

Unlocking Growth: The Role of Investment Banks in Private Equity Investments

Typically, the further out on the risk spectrum you go, the more possible upside you have. One case where people might want to stay on the sell-side and not go to the buy-side is if they don’t have the personality to take risk. For example, some people may enjoy studying a company or industry and then writing a report on their findings, much more than risking their job on the outcome of that report. Besides research, you need technical skills like financial modeling, PowerPoint, Excel, and analysis. You may want to craft your communication and presentation skills if we are talking about soft skills. However, if you can do long hours of research, you may be a fit for this role.

Buy-Side vs. Sell-Side Analysts: What’s the Difference?

Both investment bankers (sell-side) and private equity professionals (buy-side) build M&A models for transactions. The bankers will prepare a model that’s shared externally with potential acquirers of the business, which means the model must be extremely presentable and easy for other parties to understand and use. While firms on the buy-side will receive this model from the banks, they will typically build their own financial model to ensure complete confidence in the analysis. Below is an example of a pro forma balance sheet in a sell-side M&A model.

How Data Helps with Buy-Side vs. Sell-Side M&A

To do this, sellers often engage an investment bank or M&A advisor with prior experience to help them through every step of the process. In many cases, investment banks offer advisory services for either side of a transaction, meaning in one transaction they represent a seller and in another a buyer. Understanding the dynamics of buy side and sell side activities is crucial for professionals navigating the complexities of investment banking. As the financial landscape evolves, the synergy between these two facets continues to shape the industry, providing opportunities for growth, innovation, and value creation. In the intricate world of investment banking, professionals often find themselves on either the buy side or the sell side, each playing distinct yet interconnected roles in the financial ecosystem.

Advantages of Data in Buy-Side M&A

Working for the “sell-side” means you work for a bank or for a financial services company that is selling something. For example, an investment banker is a sell-side job because investment bankers are selling advice on raising capital and making acquisitions. Sell-side is involved in primary capital markets and secondary capital markets.

Level up your career with the world’s most recognized private equity investing program. The sell-side tries to get the highest price possible for each financial instrument while providing insight and analysis on each of these financial assets. Robust models and financial estimates are less important to sell-side analysts than their buy-side colleagues. Likewise, price targets and buy/sell/hold calls are not nearly as important to sell-side analysts as often suggested. Analysts can be below average for modeling or stock picks but still do all right if they give useful information. Much of this information is digested and analyzed—it never actually reaches the public page—and cautious investors should not necessarily assume that an analyst’s printed word is their real feeling for a company.

For instance, a buy-side analyst who is monitoring the price of a technology stock observes a drop in the price, as compared to other stocks, yet the tech company’s performance is still high. The analyst may then make an assumption that the tech stock’s price will increase in the near future. Based on the analyst’s research, the buy-side firm will make a buy recommendation to its clients.

Many equity research professionals can win other research roles or join long/short equity hedge funds, but it’s much rarer to go into IB or PE roles. In roles like private equity and corporate development, there’s less market-related stress, but there’s longer-term anxiety because it takes years to determine if an acquisition performed as planned. In the rest of this article, I’ll focus on the buy-side vs. sell-side and deals vs. public markets differences, but I’ll add a few references to the support roles where appropriate. Something like private banking is also in this “Grey Zone” because private bankers invest on their clients’ behalf, but they typically charge fees based on AUM – and most people do not consider PB a traditional buy-side role.

The portfolio manager may then execute trades through the sell-side’s trading desk to implement their strategy. One main difference between buy-side and sell-side analysts is their focus. Buy-side analysts are primarily concerned with making profitable investment recommendations for their own funds. They have a vested interest in the performance of their investments and are often compensated based on the returns they generate.

The investment bank will look to set up this arrangement, to find buyers of these issues and to act as an underwriter (essentially a guarantor) for the deal in many cases. The idea is to put those that are looking to raise more money (e.g. the companies) in contact with those that have money (e.g. asset managers – read on for that bit!). Investment banks are often referred to as the ‘sell-side’, due to the nature of their work, as will be explained in more detail in a bit.

But when deciding which side, keep in mind that there are differences as well. Buy-side or sell-side investment banking is one of the most common use cases of virtual data rooms. The buy side of mergers and acquisitions performs buy-side research and analysis to identify potential sellers. Based on this research, they decide on the securities, businesses, or assets to purchase.

Other areas that investment banks commonly get involved in include restructuring of companies and the offering of investment advice. Companies that look to raise money may go to an investment bank to help orchestrate a deal to sell some of their debt in the form of bonds, or equity, in the form of shares. Buyers and sellers are rarely the only two parties involved—investment banks also play an important role in the M&A process, and can advise on either the buy-side or sell-side.

In the beginning phases of the M&A project, the banker is responsible for conducting due diligence on the company. They will analyze valuations, arrange marketing materials, and execute non-disclosure agreements (NDAs). In a designated buy-side transaction, the M&A banker orchestrates the real financing. Effective acquisition plays a significant part in an organization’s natural development.

The sell side is an indispensable ingredient in all financial systems, being a provider of unique services to the last but not the least envisaged market participant. Sell-side entities including investment banks and brokerage firms do an extraordinary job in promoting new financial products, presenting analytical research reports, and executing trades for clients. These operations benefit not only buy-side institutions but also facilitate smooth functioning and competitive pricing for private investors. One of the more familiar instances of buy-side and sell-side examples is the trading of securities “such as stocks and bonds “because of their prevalence for many types of investors, especially individual investors. However, for investment bankers, as well as the companies and private equity firms they work with, the concept of securities trading doesn’t address all activity.

But they’re also cherry-picking data and ignoring the ~99% of professionals in the industry who earn an order of magnitude less – and the various buy-side roles with no performance fees or much lower fees. So, you’ll still value companies in a role like equity research or at a long/short equity hedge fund, but these will often be “quick valuations” to take advantage of a certain market move or company update. On the second point – “misfits” – corporate finance professionals at normal companies do not raise or invest money and do not charge commissions. Equity research and sales & trading are also in the “sell-side” category since they mostly earn money from fees paid for their services (research and market-making). The best example of a sell-side firm is an investment bank across most industry and product groups, such as healthcare, technology, and M&A.

For example, a corporation that needs to raise money to construct a new factory would contact its investment banker to issue debt or equity to finance the building. The bankers conduct a thorough financial modeling analysis and due diligence to gauge investors’ perception of the company’s value. They then create various marketing materials, including detailed financial statements and Excel reports, distributing the information to potential investors on the buy-side.