Our team at Persient understands that the M&A process can be intimidating and confusing if you are unaware of the intricacies of the parties involved. Knowing more about the different sides of this process can ease the mind of business owners. At a glance, the two sides seem simple and straightforward: one side is buying and the other is selling. However, there are less obvious details in the competitive bidding process and in the selling process that are important to understand when dealing with M&A advisory firms.
Buy-side in M&A deals
Generally, buy-side advisors are contracted by large strategic acquirers or private equity firms and are made up of institutional investors. Working on the buy-side typically means the client is the buyer. These advisors assist their clients by limiting competition using exclusivity agreements, establishing deal protections, and enhancing the payment terms and equity structures to benefit their clients. Buy-side investment banks assist their clients in optimizing the terms of a contract to ensure a successful deal.
Sell-side in M&A deals
The opposite of the buy-side is the sell-side. This sector is often composed of founders and private equity firms to liquidate equity in their companies. On the sell side, advisors work with their clients to do their due diligence in determining if the sale will be beneficial, create a competitive bidding process among potential buyers, and communicate with buyers to improve deal terms for the seller.
One of the key benefits of using an advisor as a seller is the spectrum of their network. Advisors are able to target potential buyers from previous experiences while working in the industry. There is also a lot of value in utilizing a sell-side investment bank in the due diligence process. These advisors will do a deep dive into the data and documents to verify the legitimacy of this target company and uncover any liabilities that may have been hidden. This can be an arduous task for founders to take on alone, so it is incredibly helpful in having an investment bank takes over.
How can an investment bank be both on the buy-side and sell-side?
There are instances where the buy-side can also act as the sell side, in cases where buyers acquire shares of a company and then move to sell those shares. This combination can be desirable, as the advisor will be better able to understand the needs and goals of strategic inquiries as they are familiar with both ends of the process. However, this is not so much the rule as it is the exception.
Choosing the Right M&A Advisory Firms for You
Choosing the right M&A advisory firms can make or break the success of your deal. At Persient, we have decades of experience preparing business owners across Southern California and nationwide for success and helping them realize the full potential value of their company. Our talented team is here to assist whenever you are ready to start your M&A journey. Contact us today.
Investment banking services and securities offered through Independent Investment Bankers Corp., a registered broker-dealer, Member FINRA / SIPC. Persient LLC and Independent Investment Bankers Corp. are not affiliated entities. FINRA Broker Check.