Most of the time, when you think about M&A investment banking, you think about sell-side advisory. I think this is fine and all, but over time, I’ve learned to have increased respect for the importance of buy-side M&A with strategics. There are several reasons for this:
1) On buy-sides, you have to know your client in addition to the targets. They’re likely in the same competitive space, so you can very quickly learn about an industry. On sell-sides, you really only get to learn about your client because the buyer could either be a financial sponsor who isn’t in the industry at all or is a strategic buyer who isn’t sharing info with you. This slows down the learning curve.
2) Buy-sides train investment bankers to have more of a long-haul mentality. On a buy-side, the client’s performance with the transaction after the deal is done reflects on the IB that represented them. This is not as much of the case with sell-sides, where check size is more of a one and done. Even in the case of contingent consideration and earnouts, people don’t generally blame the bank, so there’s less of an incentive for bankers to get deep knowledge of an industry.
3) Bankers that do buy-sides often do multiple deals with the same client. Not only is this repeat business good for the bottom line, it also gives you the deep knowledge you need to be a better banker and know your companies forwards and backwards.
4) Not all bankers do buy-sides, so you can set yourself apart by saying you have experience looking at things from the other side of the table. This gives you the industry-specific knowledge you need to get the best price for your sell-side clients.
Overall, the bankers who think about buy-sides more than the average have impressed me more than those who don’t regard it as much or exclusively do sell-sides. You can be really successful doing that, but I find that the people are often much less knowledgeable than they should be.
