Buy Side vs Sell Side M&A

Difference between advisory roles in M&A

Buy Side vs Sell Side in Mergers and Acquisitions (M&A)

If you are interested in having 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. Everywhere you go, there is an attempt to make such distinctions between the two. So, how do these two actually differ? Investment bankers

When you refer to the sell-side, it refers to firms who sell products like bonds, stocks, or the sale of an entire company (as in investment banking). Your job if you are on the sell-side is to make investors buy these products, hence the term “sell”-side.

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.

In terms of M&A, the buy-side means working with the buyers and finding opportunities for them to acquire other businesses.

The sell-side, on the other hand, means working with the sellers who are trying to find a counterparty for the sale of a client’s business.

M&A Buy Side vs Sell Side M&A theme

 

How Do M&A Advisors Earn Money?

For those who are still deciding as to 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 earn through salary and commission. In the long run, you have a higher earning potential as an investor, rather than 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 commission on sales on the sell-side. But when deciding which side, you do not just consider this factor. Keep in mind that there are differences in other aspects. There are differences in the hours, compensation, and structure of work.

 

Buy Side vs Sell Side M&A Modeling

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.

 

Sell Side M&A Model in Excel

 

The screenshot above is from CFI’s M&A Modeling Course.

 

Additional resources

Thank you for reading this guide to Advisory roles for both buy side and sell side M&A transactions. CFI is the official provider of the global Financial Modeling & Valuation Analyst (FMVA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional resources below will be useful:

FMVA certification program

Advance your career in investment banking, private equity, FP&A, treasury, corporate development and other areas of corporate finance.

Get certified as a financial analyst with CFI’s FMVA Program.