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The Difference Between Sell-Side and Buy-Side M&A

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Written by:

Kison Patel

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Last Modified:

March 18, 2025

Financial markets consist of two primary sectors–the sell-side and the buy-side. DealRoom facilitates numerous M&A transactions annually for organizations across both sectors.

Whether you are a business owner seeking to expand your firm, a buy or sell-side analyst exploring career opportunities, or simply interested in gaining insight into market operations, you must understand the fundamentals of each side, their distinctions, and their collaborative role in shaping a robust investment and capital environment.

What is Sell-Side M&A?

The sell-side of the financial market is responsible for creating, promoting, and selling traded securities to the general public. This helps generate liquidity by ensuring the availability of trades for distribution and facilitating the exchange of financial assets.

What is Buy-Side M&A?

In contrast, buy-side M&A focuses on purchasing and investing in large quantities of securities, typically for fund management purposes. The objective is to generate investment returns and manage client portfolios, including hedge, pension, and mutual funds.

The Key Differences

There are distinct roles for the buy-side vs sell-side within a financial sector. The buy-side manages a unique business's potential investment decisions concerning its corporate finances, such as acquiring pension funds, hedge funds, real estate, and other assets. The sell-side concentrates its efforts on issuing, selling, or trading these types of securities, so a typical transaction would include investment banks, private equity, venture capital, advisory firms, corporations, and other institutional investors, who provide ample opportunities for sell-side analysts.

Understanding these distinctions is paramount to investment banking, as both sides complement and contribute to an industry's overall health.

The Role of Sellers:

Advertise and sell securities
Generate liquidity for listed securities
Assist clients with obtaining new or discarding failing asse
Provide equity research and analysis of indexed companies
Perform financial modeling and valuations
Advise corporate clients on significant transactions, mergers, and acquisitions
Create and build relationships with new businesses and corporations
Issue debt or equity
Provide underwriting services to launch IPOs and bond issuances

The Role of Buyers:

Increase assets under management
Conduct internal research on potential investment and financing opportunities
Perform financial modeling, research reports, and valuations

Identify institutional investors and recruit capital to manage.
Earn the most favorable risk-adjusted return on funds
Determine whether to buy, sell, or hold investments
Oversee clients’ money

Buy-Side Motives and Activities

The buy-side of the capital markets consists of professionals and investors with funds available to purchase securities. These securities can range from common and preferred shares to bonds, derivatives, and other financial spin-offs issued by the sell-side entities.

Consider an asset management firm managing a fund that finances alternative energy companies for its high-net-worth clients. The portfolio manager of the buy-side firm would actively evaluate opportunities to invest these funds into the most promising businesses within the industry. One day, the vice president of equity sales at a leading investment bank or private equity firm contacts the portfolio manager, informing them about an upcoming IPO by a prominent alternative energy company. Intrigued by the prospect, the portfolio manager may invest in the company, thereby directing capital from the buy-side to the sell-side.

Sell-Side Motives and Activities

On the capital markets' sell-side, professionals work on behalf of corporations to raise capital through the sales and trading of securities.

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. This process completes the cycle of capital flow in financial markets, where the sell-side facilitates the issuance and distribution of securities to meet corporate financing needs.

Buy-Side Firms

The largest and most renowned firms and banks on the buy-side are as follows:

BlackRock
The Vanguard Group
The Charles Schwab Corporation
UBS
State Street Global Advisors
Fidelity Investments
Allianz
J.P. Morgan Asset Management
BNY Mellon Investment Management
PIMCO
Others

Sell-Side Firms

The following list catalogs the largest, most profitable, and otherwise notable investment banks.

JPMorgan Chase
Goldman Sachs
Bank of America Merrill Lynch
Morgan Stanley
Citigroup
Credit Suisse
Barclays Investment Bank
Others

What Does a Sell-Side Analyst Do?s

Sell-side research analysts are integral to investment banks, brokerage firms, commercial banks, corporate banks, and Wall Street trading desks. Their primary responsibility is to assess companies and conduct equity research, evaluating factors like future earnings potential and other investment metrics. These analysts frequently issue recommendations on stocks and other securities, typically in the form of buy, sell, or hold ratings, which they communicate to their clients.

What Does a Buy-Side Analyst Do?

Buy-side research analysts typically work for money management firms such as mutual, pension, trusts, and hedge funds. Their role as equity research analysts focuses on identifying investment opportunities that enhance their clients' overall portfolio performance. These analysts research and make recommendations that benefit the firm's money managers.

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Difference between Buy-Side and Sell-Side Analysts

Understanding the roles of buy-side and sell-side analysts is crucial for anyone involved in financial markets. Both play vital roles but differ significantly in compensation, analysis accuracy, and required skills. Here’s a breakdown of these differences:

Compensation

Because buy-side analysts typically work for institutions like mutual funds, hedge funds, or pension funds, their compensation is often tied to the performance of their investment recommendations. As such, they can receive substantial bonuses if their advised investments perform well, reflecting the direct impact of their work on the fund’s success.

Brokerage firms, investment banks, or research firms generally employ sell-side analysts. Therefore, their compensation is usually more stable and less performance-based than that of buy-side analysts. They may earn bonuses based on the revenue generated from their research through trading commissions or investment banking deals rather than direct investment performance.

Accuracy of Analysis

Buy-Side Analysts Focus on creating detailed, long-term investment strategies for their firm’s portfolio. Their analysis tends to be more in-depth and proprietary, aimed at achieving high returns over time. Accuracy is critical, as their firm directly acts on their recommendations, impacting the overall performance of the managed funds.

Sell-side analysts produce research reports and recommendations distributed to clients and the public. While accuracy is essential, sell-side analysis often generates trading activity and client interest. Their reports might be more frequent and cover a broader range of securities but may not always be as detailed as buy-side research.

Skills Required

Buy-side analysts need strong analytical skills, a deep understanding of financial markets, and the ability to develop long-term investment strategies. They must also be adept at portfolio management and risk assessment and possess excellent research skills to uncover investment opportunities that align with their firm’s objectives.

Sell-side analysts require strong communication skills to present their research and recommendations to clients effectively. They must be proficient in financial modeling and market analysis and often have to cover a wide range of sectors or securities. Networking and maintaining relationships with clients are also critical components of their role.

In summary, while both buy-side and sell-side analysts play crucial roles in the financial markets, they differ in compensation structures, the focus and depth of their analysis, and the specific skills required for success in each role. Understanding these differences can help navigate career paths or leverage their insights effectively.

Sell-Side vs Buy-Side M&A Transactions

The buy-side vs. sell-side distinction in M&A refers to firms that sell or purchase products like stocks and bonds. For those on the sell-side, an analyst’s job is to entice investors to purchase these products, while those on the buy-side utilize capital to procure these assets for sale.

In an M&A context, the buy-side works with buyers to find opportunities to acquire other businesses, first raising funds from the investors and then deciding where and what to invest in. The buy-side can utilize M&A software like DealRoom or other data rooms to manage the diligence process for the whole lifecycle. Conversely, the sell-side could use DealRoom to find a counterparty for the client's business.