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Sell-side vs Buy-side M&A: What is the Difference?

Financial markets are composed of two main sectors: sell-side and buy-side.

We at DealRoom have dozens of M&A deals conducting on our platform during a year conducting from both sides and have some expertise to explain you everything about them.

Whether you are a business owner seeking to expand your firm, looking for career opportunities as a buy or sell-side analyst, or you simply want to gain a better grasp of how capital markets operate, it is imperative to understand the fundamentals of each side, how they differ, and how they work together to create a functioning investment and capital system.

What is Sell-Side and Buy-Side?

Essentially, sell-side is the sector of the financial market that is all about creation, promotion, and selling traded securities to the public. On the other end, buy-side deals with purchasing and investment of large portions of securities for purposes such as fund management.

What are the Core Differences?

Buy-side refers to individuals or companies buying securities, including pension funds and hedge funds. Contrarily, sell-side refers to companies that issue, sell, or trade securities.

The types of firms on the m&a sell-side typically include investment banks, advisory firms, and corporations.

These organizations usually offer greater opportunities for aspiring analysts than those in buy-side. This is often largely due to the sale dominate nature of the business.

In the investment banking industry, it is paramount to know the difference between buy-side and sell-side. The two sides create the full picture and rely on each other for the other’s prosperity.

Buy side vs Sell side

What are the Roles on Both Sides?

The Role of Sellers:

  • Advertising and selling securities.
  • Generating liquidity for listed securities.
  • Assisting clients with getting in and out of positions.
  • Providing equity research analysis of indexed companies.
  • Performing financial modeling and valuation.
  • Advising corporate clients on major transactions, mergers and acquisitions.
  • Creating and building relationships with new businesses and corporations.
  • Facilitating increasing debt and/or equity.

The Role of Buyers:

  • Increasing assets under management.
  • Performing financial modeling and valuation.
  • Conducting internal research on potential investment and financing opportunities.
  • Identifying investors and recruiting capital to manage.
  • Earning the most favorable risk-adjusted return on capital.
  • Determining whether to buy, sell, or hold investments.
  • Overseeing clients’ money.

Buy-side Activities and Motivation

The buy-side of the capital markets has professionals and investors with money or funds to buy securities. These securities include common shares, preferred shares, bonds, derivatives, or a variety of other products that are issued by the sell-side.

For example, an asset management firm running a fund invests a high net worth of clients' money into alternative energy companies.

The portfolio manager at the firm seeks opportunities to utilize those funds by investing in securities from companies that they assess to be the most attractive in the industry.

On a particular day, the vice president of equity sales at a major investment bank calls the portfolio manager and notifies them of an upcoming initial public offering of the company in the alternative energy.

The portfolio manager decides to invest and buy the securities, stimulating the money to flow from the buy-side to the sell-side.

The main skills are:

  • Industry expertise
  • Excel proficiency
  • Financial modeling
  • Communication and people skills
  • Raising capital
  • Accomplishing targeted rates of risk-adjusted return
  • Compiling research reports

Sell-side Activities and Motivation

On the sell-side of the capital markets, there are professionals who represent corporations that raise capital by selling securities.

Generally, sell-side consists of banks, advisory firms, or any other firm that facilitates the selling of securities on behalf of their clients.

For example, a corporation that needs to raise money to build a new factory will contact their investment banker and ask them to help issue either debt or equity to finance the factory.

The bankers then prepare an analysis, with the aid of extensive financial modeling, to determine what they believe investors will think the company is worth.

They then prepare a diverse array of marketing materials and distribute them to potential investors, e.g. those on the buy-side, thus completing the circular flow of capital in financial markets.

The main skills are:

  • Industry research and analysis
  • Excel proficiency
  • Financial modeling
  • Client relationship handling
  • Designing and performing pitchbook presentations
  • Winning new clients and businesses
  • Selling and closing deals
  • Compiling research reports

Buyer Firms List

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
  • Other

Seller Firms List

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

This list of investment banks notes full-service banks, financial conglomerates, independent investment banks, private placement firms and notable acquired, merged, or bankrupt investment banks.

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

Who is Sell-Side Analyst and What He Does?

Sell-side analysts, often referred to as equity research analysts, work in investment banking, equity research, commercial banking, corporate banking or sales, and trading.

These individuals work for brokerage firms and evaluate companies for future earnings growth and other investments criteria.

Sometimes, they may place recommendations on stocks or other securities, which typically are phrased as buy or sell or hold as well as offer recommendations to their clients.

Who is Buy-Side Analyst and What He Does?

Buy-side analysts customarily work for buy-side money management firms, which include mutual funds, pension funds, trusts and hedge funds.

These individuals are trained to identify investment opportunities that will improve the net worth of their client’s portfolio.

Typically, they provide research and recommendations exclusively for the benefit of the firm's own money managers.

Comparison in Mergers and Acquisitions (M&A)

Buy-side compared to sell-side in mergers and acquisitions refers to firms who sell products like stocks and bonds.

For those on sell-side, an analyst’s job is to entice investors to purchase these products. On the other hand, those on buy-side utilize capital to procure these securities or firms that are for sale.

The buy-side process begins by raising the funds from the investors and then deciding where to invest and what to buy.

In a M&A context, buy-side ecompasses working with the buyers and finding opportunities for them to acquire other businesses.

Buy-side utilize specific M&A software such as DealRoom or buy side data rooms to manage the diligence process or even the whole lifecycle.

Contrarily, sell-side in M&A terms entails working with the seller who is trying to find a counterparty for the sale of a client's business.

Software for Buy-Side and Sell-Side M&A


sell-side vs buy-side

Related Resources:

A Buy-Side Perspective Using Agile Principles

M&A Strategy from Buy and Sell Side

Important Lessons on the Seller Side on M&A

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