Buy Side M A
If you are interested in holding an investment banking job, you often find people talking about the buy-side versus the sell-side. You may not have asked that question yet, but perhaps you have heard exchanges about the buy-side and the sell-side M&A. So, how do these two actually differ?
buy side m a
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. You raise this capital from investors and from there, you will have to make your decisions as to where you want to invest them and what you will buy.
For those who are still deciding whether they should be on the buy-side or the sell-side, you may want to know how you can earn money should you choose to be on either one of these sides. You either earn money as an investor yourself or as the agent of an investor/corporation, and therefore, through salary and commission. In the long run, you have a higher earning potential as an investor, rather than as an agent.
The buy-side is said to be better when it comes to making money, as it gives you the opportunity to earn more, especially when the investments generate high returns. This appears to be more lucrative compared to earning a commission on sales on sell-side M&A. But when deciding which side, keep in mind that there are differences as well. There are differences in the hours, compensation, and structure of work.
In the financial market, the buy-side refers to the entities that are involved in the process of acquisition. Buy-side firms work with a buyer and find beneficial opportunities for them to acquire other businesses.
The main goal of sell-side firms is to help businesses sell securities. Sell-side firms mainly do it by advising companies on every step of the financial transaction, conducting internal research to identify investment opportunities, and then pitching the potential investment to possible investors.
The main goal of buy-side firms is to help their clients make successful investments and get investment returns. They make investment decisions based on research of the financial analysis conducted by the sell-side and many other factors.
The sell-side is usually represented by investment banks, commercial banking institutions, advisory firms, and stock market brokerage firms. Sell-side analysts, investment bankers, and stockbrokers assist their clients in raising capital by selling securities.
The buy-side is represented by asset public and private companies, management firms, hedge funds, mutual funds, and private equity firms. Buy-side analysts, asset managers, institutional investors, and retail investors help their clients to generate investment returns by means of an M&A deal.
As a founder, navigating an M&A transaction is less intimidating if you understand the dynamics of the parties involved. Learn about the interests and strategies of the parties operating on the buy-side vs. the sell-side of a transaction.
Something less obvious is that a given party can operate on the buy-side or the sell-side of a transaction, depending on the circumstances and timeline. For example, a private equity firm who acquires shares in a company on the buy-side will eventually move to the sell-side when the time comes to liquidate their investment. Founders and strategic buyers can also operate on either side of an M&A transaction as buyers or sellers.
In order to improve the probability of a closed deal with favorable terms, parties on both the buy-side and sell-side will often hire an investment bank or M&A advisor to execute the transaction. Sellers hire a sell-side M&A advisor to negotiate with buyers on their behalf, and vice versa.
Buy-side investment banks are usually contracted by large strategic acquirers or private equity firms to search for companies they can acquire or invest in, as well as to evaluate the integrity of a potential investment. Their goal is to optimize contract terms for the buyer while also closing a successful deal.
Sell-side investment banks are most often retained by founders and private equity firms to liquidate all or a portion of their equity in their company. Founders who hire a sell-side firm recognize that an experienced investment bank will be better positioned to negotiate with an experienced buyer during the transaction process.
Banks that offer both buy-side and sell-side advisory services often position this combo as desirable, arguing that by advising on the buy-side they better understand the needs and goals of strategic acquirers when advising on the sell-side.
Similarly, this conflict arises for banks who advise exclusively on the sell-side, but who offer their services to private equity firms on the sell-side. When advising founders on the sell-side, such a bank has an incentive to favor private equity buyers whom they could run a larger secondary transaction for a few years down the road.
For founders evaluating potential investment banks to hire, a red flag they should look for is whether the bank offers advisory services on both the buy-side and sell-side, or if the bank offers sell-side services to private equity firms. You want to make sure to hire an unconflicted investment bank.
For answers to these questions and to get a sense of what the full sell-side M&A process is like, take a look at the For Founders: The M&A Process section of our site. To see in detail what the M&A process looks like after signing an engagement letter with an investment bank (including average timelines), take a look at our article about the deal process.
The process of financial transactions is split into two different segments: sell-side and buy-side. And, in the investment banking M&A context, buy and sell side mean something completely different compared to just the general financial world. It is important to know the differences between each and how they differ in terms of M&A.
Private equity firms are the most prominent players on the buy-side of the M&A world because they are constantly making acquisitions. They are always deciding on if they want to buy, hold, or sell their assets to gain profit. Deal origination represents a critical part of buy side activities for both sell side and buy side firms. Deal origination is the process of uncovering potential M&A transactions.
The process of financial transactions is split into two different segments: sell-side and buy-side. And, in the investment banking M&A context, buy and sell side mean something completely different compared to just the general financial world.
Buy-side vs. sell-side M&A at a glance:The sell-side of M&A deals with all the activities involved in selling a company to a potential buyer or investor. On the flip side, the buy-side of M&A is all about investors or buyers purchasing companies.
The buy-side process of an M&A transaction can start in various ways. For example, a strategic acquirer will look for an acquisition because they either have synergies or an opportunity to expand their existing business model with a new company, while a private equity group might be looking for a high-growth company to add to their portfolio.
In either case, buyers are looking for a strategic benefit or return on investment when approaching an M&A process. Buy-side strategic acquirers and investors want to improve the value of their company and fill gaps in operations, product offerings, or geographical locations to complement their existing offerings.
As the name suggests, the buy-side in M&A refers to the companies that intend to buy the other company in the transaction. Recently, nearly 60% of typical buyers of software are private equity-driven deals (private equity direct or PE-backed strategic buyers). To accomplish the transaction, buyers often bring in an investment bank or M&A advisor to help them through the process.
What motivates companies on the buy-side of M&A? If the buyer is a strategic acquirer, the buyer is motivated to complete an acquisition for various reasons, including improving market share, entering a new market, consolidating the competitive landscape, or enhancing its product offering. Private equity firms seek to invest in and grow a company to either operate it for profit or sell it in the future for a return on investment.
Just as with the buy-side, the sell-side of M&A can be accomplished in myriad ways. With a strategic exit strategy in place, sellers can outline exactly what type of buyer may be the best partner for them, as well as what the ultimate outcome will be (selling the company entirely, selling a portion, etc.).
The sell-side of M&A refers to the companies involved in selling a business to a target acquirer. Typically, the seller is the founder or owner of the company. While many different exit strategies can represent a unique set of goals, usually the most important objective is to get the best price, terms, and fit possible. 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.
Buyer competition, non-listed sales, limited time for prospecting/pipeline building, and limited administrative resources: these are all factors that add to the difficulty of buying a business. We understand these limitations, which is why we have created buy-side sourcing services designed to do the work that corporate, family office, private equity, and individual buyers know is necessary but often falls to the bottom of the priority list.
There are always two sides in a transaction: a buyer and a seller. In the financial industry, these are generally referred to as buy-side and sell-side, respectively. Let's dive into the differences, as well as how modern investment bankers are using data to their advantage to make sure their side always comes out on top in a transaction. 041b061a72