Buy-Side vs Sell-Side Equity Research Career Differences

This article will go through the responsibilities, methods, and roles of buy-side vs. sell-side analysts. By understanding each, you’ll gain a clearer picture of how these analysts help shape the views of investors. These firms raise outside capital from investors – otherwise known as limited partners https://www.xcritical.com/ (LPs) – and invest their contributed capital across various asset classes using a variety of different investing strategies. On that note, a related function by the sell side is to facilitate buying and selling between investors of securities already trading on the secondary market.

Buy Side vs Sell Side: Key Differences

Both sides collaborate to ensure the smooth functioning of financial markets, with each contributing its expertise to create a dynamic and efficient ecosystem. They provide insights into financial trends and projections and do research on the company’s investment potential. Based buy vs sell side on that information, they make publicly available reports that are later used by buy-side analysts. For example, when a certain corporation wants to raise money to build a new plant or factory, it will contact its investment banker and ask to issue some debt or equity that allows starting the construction. On the sell side of the financial markets, there are specialists who assist their clients (businesses and corporations) in raising capital by selling securities. As an integral part of the investment banking industry, mergers and acquisitions always involve two sides in every transaction—buy-side and sell-side.

Sell-Side vs. Buy-Side Equity Research

Meanwhile, a buy-side analyst usually can’t afford to be wrong often, or at least not to a degree that significantly affects the fund’s relative performance. Many interbank traders take proprietary positions, but salespeople generally do not. Upgrading to a paid membership gives you access to our extensive collection of plug-and-play Templates designed to power your performance—as well as CFI’s full course catalog and accredited Certification Programs. Sell-side jobs also have performance bonuses, which can be based on both personal performance, as well as on the performance of the firm. Buy-side jobs typically require more experience, and professionals are often thought to “graduate” from the sell-side to the buy-side. At the most junior positions, roles may be very similar, but at more senior positions the roles start to vary more significantly.

Buy-Side vs Sell-Side: Exit Opportunities

Regulatory changes, such as MiFID II and the Global Research Analyst Settlement, have significantly influenced interactions between analysts by emphasizing research independence and transparency. The bottom line is that if the exit opportunities are your top concern, you should try to start in a “Deals” role. Also, the standards for advancing are higher because you must make money or have the potential to do so. On average, though, it is a bit more “straightforward” to advance in sell-side roles. Once again, this point depends more on the specific industry and firm type and less on the buy-side vs. sell-side distinction. In short, the stress in sell-side roles has a higher frequency, but the stress in buy-side roles has a higher amplitude.

Sell Side: Investment Banking Industry and Firms

The sell side of finance deals with creating, promoting, and selling securities that can be traded to the public. The sell side handles all activities related to selling securities to the buy side. That can include underwriting for initial public offerings (IPOs), providing clearing services, and developing research materials and analysis.

• By understanding potential problems, you can help neutralize them or even turn them into assets that will benefit the sale.
• In a potential merger or acquisition, an investment bank may act as the “sell-side” advisor or the “buy-side” advisor for a company.
• They are correct that the most senior, top-performing buy-side professionals earn far more than Managing Directors in areas like investment banking and sales & trading.
• On average, you will work the longest hours in “Deal” roles because more work, documents, and deliverables are required to close large deals involving entire companies.

Exploring Careers in Investment Banking: Opportunities and Insights

Again, the motivations of sell-side advisors and sellers themselves are important to understand when approaching an M&A transaction. Sellers’ motivations come down to finding the right balance between price, terms, timing, and fit. For example, one seller’s exit strategy might be to stay on with the company and keep a portion of ownership, while another seller might sell the company entirely and ride off into the sunset. To explore this further, we’ll explore the definition, roles, and motivations of those on the sell-side portion of an M&A transaction. Just as with the buy-side, the sell-side of M&A can be accomplished in myriad ways.

Difference between Buy-Side and Sell-Side Analysts

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. Founders will often seek out investment banks to help with the sale of their companies simply because of how complex the process is, especially regarding due diligence. They also recognize the value of having existing industry connections since, for many decades, the private equity industry functioned almost entirely on “who you knew.” In some cases, the company the bank is representing may be attempting to go public and offer shares to interested investors. However, investment banks can sometimes sway the opinion of the company to seek out multiple paths for their exit strategy.

How Data Helps with Buy-Side vs. Sell-Side M&A

In today’s fast-moving and often volatile economic environment, the value of equity research cannot be overstated. Currently, 90% of equity research is consumed by fund managers who have the necessary entitlements to acquire it and the resources to mine for insights. For buy-side professionals, equity research is a critical tool to inform sound investment decisions backed by expert insights.

Buy-side vs. Sell-side in M&A Investment Banking

Sell-side analysts convince institutional accounts to direct their trading through the trading desk of the analyst’s firm, which adds marketing to their responsibilities. To capture trading revenue, the analyst must be seen by the buy side as providing valuable services. Since information is valuable, some analysts hunt for new information or proprietary angles on the industry. As such, there is tremendous pressure to be the first to the client with new and different information.

Moreover, understanding the differences between the two is crucial for anyone involved in the markets, as they have disparate purposes and intended audiences. However, there can also be a second meaning used in investment banking, in particular as it relates to M&A transactions. In a potential merger or acquisition, an investment bank may act as the “sell-side” advisor or the “buy-side” advisor for a company.

Their goal is to drive trading activity and support their firm’s sales and trading operations, often with a shorter-term focus. 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. For example, an asset management firm runs a fund that invests the high net worth clients’ money in alternative energy companies.

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.). In other words, what do buy-side companies do during an M&A transaction, and what are they responsible for? Let’s dive into the definition, roles, and motivations of those on the buy-side portion of an M&A transaction. IBCA and its partner institutions reserve the rights of admission or acceptance of applicants into their programs.

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. Analysts behind the scenes often play a critical role when a company’s stock soars or plummets. Buy-side and sell-side analysts share the goal of analyzing securities and markets, but their incentives and audience mean that their results will often differ. A sell-side analyst is employed by a brokerage or firm that handles individual accounts, providing recommendations to the firm’s clients.