Someone that I am talking to is an associate at a boutique investment bank, and says that she does quite a few buy-side deals. I'm quite familiar with what bankers do on the sell-side; however, what is the value proposition on the buy-side? I've searched around this forum and tried googling a bit.
The particular fund she does this for is local and all the targets have been as well; so, it can't be international expertise.
The fund isn't a small shop that runs lean; so, no need to outsource heads.
The deals are typically middle market, with terms rarely being disclosed; so, I don't think it is the fund rewarding a bank for "league table credit".
Can any bankers please clue me in? I know I can ask, but I pretended I knew what it was early on and have been faking it since then. No turning back now.
For large banks (BBs etc), acquiror (client) needs debt financing for the deal and the 'buyside M&A advisory' is just a prerequisite for the client to access that bank's giant balance sheet.
I'm not sure how big of a balance sheet your friend's boutique bank has though.
Worked with a group that did MM buyside advisory for about a year, so I may be able to provide some color. In my experience the bulk of the work is on add-ons for platform companies of the fund while they put their effort on larger, more important deals. In addition some smaller strategics may not have a fully built out CorpDev team to evaluate and engage in M&A opportunities. In the same way many Industry specific boutiques can provide expertise for very niche areas which the strategic or PE client may not have experience in. This is just my experience, but hope it helps.
Wow—some weird comments above, making it more complex than it needs to be. Really it’s a pretty straightforward concept:
A sell-side: ownership wants to sell a business, they hire an investment bank to help contact/ find buyers, create marketing materials and facilitate buyer questions, and determine the best (highest) price to sell the business.
A buy-side: 2 situations usually:
1) an investment bank loses the pitch to be a sell-side advisor, and goes to people who they think would likely be interested in buying the business had they won the sell-side and they say— “hey, we know this business is coming into market soon, we put together these materials and valuation guidance for them and also have sold a ton of businesses similar to it. Let us know if you are interested and we can help inform you what the best price to bid would be to win the business and we also can use our experience in the field to help give you an idea of any other trends or questions you might want to know.
2) A bank pitches to a large company or smaller company and says, “hey, we have been thinking, you and x company should combine, here is why, and we will help facilitate that process” or, a company says, “hey, we want to buy something, can you help us buy something?”
Buy-side advisory is usually just providing valuation expertise, market dynamics expertise, and potentially idea generation to help inform a thesis of acquiring a business. The processes is much shorter in engagement, smaller fees, and often end up not successful—if you do a sell-side the business could go to any of the 100 buyers you reach out to (assuming it is a mm process) if it is a buy-side, you are picking one of those 100 buyers and saying, “hey, we can help you!”
Edit: just adding, cause someone threw monkey shit and I want to be clear, it’s not like it’s second prize doing buyside advisory always or anything. Often a buyside engagement can be really cool as an analyst because you are actually thinking like an investor or trying to help a potential buyer/investor determine something versus just blindly selling. From a bank perspective though, it seems like often they are done as favors to PE firms or they are just lower fee, less work, engagements. I’m sure there are banks that do buyside advisory primarily though and have some unique niche carved out. Either way, neat if you can get a rep of both IMO.
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