Buy-side vs sell-side M&A: Selecting the right approach
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While M&A practitioners are looking for a relative rebound of deal activity in 2024, let’s recall the roles and responsibilities of each side of M&A investment banking.
In this article, we’ll explain the difference between the buy-side and sell-side of mergers and acquisitions. Read on!
What is buy-side vs sell-side M&A?
The buy side of an M&A transaction refers to the individuals and organizations involved in the acquisition process. Buy-side firms and specialists work with the acquiring company to ensure it gets the most beneficial conditions during the transaction.
On the other hand, the sell-side refers to the entities and individuals involved in the sale process. Sell-side firms work with the selling company and assist in finding the best acquirer and selling the company for the best price and conditions.
Buy-side and sell-side: understanding the differences
The primary difference between the buy side and the sell side lies in their perspectives: the buy-side M&A focuses on the buying process, while the sell-side M&A focuses on the selling process.
Let’s now dig a bit deeper and define the difference between the buy side and the sell side in three main categories: motivation, organizational structure, and involved entities.
Buy-side
The buy side of the deal is represented by the acquiring company and other specialists who work with the acquirer. These parties are concerned about financial analysis, acquisition, and investment.
Motivation
The main goal of the buy side in investment baking is to make a successful investment or acquisition and get the best investment returns.
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.
Organizational structure
During the acquisition process, an acquirer typically works with the following specialists:
- Buy-side analysts
- Institutional investors
- Retail investors
- Asset managers
- Financial advisors
- Tax specialists
- Industry experts
- Lawyers
The buy-side investment banking team analyzes the reports made publicly available by the sell-side team, makes its reports based on that, and decides on investment opportunities. The reports prepared by buy-side companies are not typically publicly available.
Involved entities
The institutions that usually perform on the buy-side of M&A transactions are the following:
- Hedge funds
- Asset management firms
- Private equity firms
- Mutual funds
- Private and public companies
- Pension funds
Sell-side
The sell side of the transaction is represented by the selling company itself and other outside specialists that help with the selling process and comprise the sell-side team. The sell side of the deal is all about advertising, generating interest, and attracting potential buyers.
Motivation
The main goal of the sell side in the M&A process is to successfully sell securities, business, or its assets.
The selling company hires outside specialists who help them with advertising and advising on every step of the selling process so that the seller gets the best deal possible.
Organizational structure
During the selling process, the selling company typically works with the following specialists:
- Sell-side analysts
- Stockbrokers
- Commercial bankers
- Investment bankers
- Market makers
- Financial and tax advisors
- Marketing specialists
- Due diligence specialists
The sell-side M&A team performs research, identifies a selling company’s investment potential, and provides insights into current financial projections and trends. Based on the findings, sell-side advisors create publicly available reports that buy-side analysts use later.
Involved entities
Among the institutions that usually perform on the sell side of the financial transaction are the following:
- Commercial banking institutions
- Advisory firms
- Investment banks
- Stock market brokerage firms
Sell-side and buy-side roles in an M&A transaction
Naturally, the buy side and sell side of the deal are also different in the roles and responsibilities they carry out during the transaction. Let’s take a look at what the buy-side or the sell-side teams do during the M&A process.
| Deal side | Responsibilities |
| Buy-side | Managing client funds Performing internal research Searching for the potential investment opportunity for the client to generate returns Evaluating target companies with the help of different financial modeling techniques Identifying whether the target company is worthy of making an investment Creating an M&A strategy and structure for the client that has the buyer’s and seller’s interests in mind Performing due diligence of the target company Negotiating transaction terms and value Ensuring assistance with the post-merger integration process |
| Sell-side | Assisting the client with money-raising Promoting the sale offer for the M&A transaction Attracting specific financial buyers, such as private equity firms Performing sell-side research and creating interest and competition between potential buyers Preparing required data for the Confidential Information Memorandum (CIM) Gathering required documents for due diligence Coordination with the client during the buy-side due diligence Evaluating the selling company with the help of various financial modeling techniques Facilitating potential M&A transactions and acting as an intermediary |
Virtual data rooms for buy-side vs sell-side
Buy-side or sell-side investment banking is one of the most common use cases of virtual data rooms.
Modern VDR providers offer numerous benefits when it comes to secure data sharing between third parties and effective collaboration, which is essential for the financial market and especially the investment banking industry.
Let’s briefly review what advantages VDRs bring for the buy side and sell side in mergers and acquisitions.
VDR benefits for the buy-side
- Streamlined due diligence
VDRs centralize all relevant documents and data, making it easier for buy-side professionals to conduct due diligence. They can efficiently review financial records, legal documents, contracts, and other critical information, accelerating the decision-making process.
- Improved collaboration
VDRs facilitate collaboration among buy-side teams, legal advisors, financial analysts, and other stakeholders. They can share insights, exchange comments, and collaborate in real-time, regardless of geographical location.
- Cost and time savings
VDRs help buy-side entities save time and money by eliminating the need for physical data rooms, printing, and logistical expenses. The streamlined workflow also reduces the overall duration of the M&A transaction.
VDR benefits for the sell-side
- Enhanced security
VDRs offer advanced security features such as encryption, access controls, and audit trails to protect sensitive information from unauthorized access or data breaches. This is essential for the sell-side that discloses its sensitive information to third parties during due diligence.
- Controlled data sharing
VDRs allow sell-side entities to control access to confidential documents and information during the due diligence process. They can set permissions, track user activity, and revoke access if needed, ensuring that sensitive data remains secure.
- Informative analytics
VDR analytics tools help the 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.
Key takeaways
- Buy-side and sell-side are primarily different in their perspectives. The buy side focuses on the acquiring process while the sell side focuses on the selling process.
- The main differences between the buy-side and sell-side lie in their motivation, organizational structure, involved entities, and responsibilities.
- The main goal of the buy side is to make a successful investment or acquisition and get the best investment returns.
- The main goal of the sell side is to successfully sell securities, business, or its assets.
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