Buy-Side Firms

Definition of Buy-Side Firms

The term buy-side comes from the financial sector. It describes companies and institutions that are active in the financial market. This article will analyze the peculiarities of the buy-side firms.

Sales stages. How to work effectively at different stages?

Whatever sales we are talking about, we can say with confidence that sales develop according to certain laws. The sales algorithm consists of stages the seller goes through sequentially in the sales process. A characteristic sign of the correctness of the seller’s work is a narrowing sales funnel. That is, the higher the seller climbs in the Algorithm, the more obvious it is for the buyer that the purchase from this supplier will allow the buyer to solve his problems effectively. Every sale process has two points – buy-side and sell-side. So, how does it work?

What is a buy-side firm?

The buy-side firms belong to market participants who invest for their customers, for example, by buying shares. It means that investment fund companies and pension funds, in particular, belong to the buy side. The market analyses prepared by the buy side usually look at the overall market, are very long-term, and form the basis for the composition of equity funds. In contrast to the buy side, the sell side refers to market players who sell financial products as intermediaries. These are, in particular, investment banks. Their analyzes usually deal specifically with individual sectors, regions, or companies and are generally designed for the short term. The analysts on this site manage portfolios for the investors or owners of capital and receive a lump sum share of assets under management. 

In the M&A transaction space, the buy-side refers specifically to an investment bank whose customer is the buyer (of a company). While the so-called sell-side, as a counterpart, refers to investment bankers whose clients are the sellers. Many buy-side activities are more or less specialized, depending on the investment strategy used.

The buy-side firm – the world of asset managers and investors

The buy-side companies include the following kinds of organizations:

  • Asset managers take on the management of client assets via discretionary mandates. The most important professional groups in asset management are the research staff, who are involved in market and company analysis, the portfolio managers, who make investment decisions based on the research recommendations, and the traders, who execute the portfolio managers’ orders in the market.
  • Hedge funds are mostly smaller companies that rely on highly specialized investment strategies. Most hedge funds are very small companies, often consisting of a single team of 10 or 20 people.
  • Private equity investors are very different from all other asset managers because instead of investing in individual stocks or bonds, they buy entire companies or larger shares of companies. Private equity funds are specifically looking for poorly managed or below-average companies that have been run down by management or are undervalued by the market.

How do buy-side firms use data room solutions?

Virtual data room follows a strict investment process with its integrated financial models and proven methods to examine, compare and evaluate potential investment opportunities comprehensively. In addition, the data room offers the following buy-side M&A services:

  • Preparatory phase: definition of acquisition criteria and search profiles;
  • Initiation phase: determining available opportunities;
  • Preparatory phase: Q&A, preliminary analysis, indicative evaluation, creation of offers;
  • Information phase: management acquisition process, control of the due diligence team, commercial due diligence, documentation;
  • Closing phase: Accompaniment of the buyer in the negotiations of the purchase and project contracts, final project assessment, sensitivity and profitability analyses, and support in the preparation of draft resolutions.

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