Buy-side

The buyer side, known in professional terminology as the buy-side, refers to advisory work on the buyer's side of a transaction. Advisors help find, approach, value, and negotiate the purchase of suitable target companies. Their mandate is to achieve the best deal for the buyer.

The process starts with search criteria by sector, size, region and business model, producing a long list that market research and conversations narrow into a short list, which is then approached confidentially. A substantial part of the work is gaining access to companies that are not formally for sale at all, because such proprietary situations without competition regularly deliver lower entry prices. Once discussions begin, the advisor coordinates valuation, due diligence with accountants and lawyers, approaches to lenders and negotiations through to completion. Compensation typically combines an ongoing retainer with a success fee which, unlike on the sell-side, is often not purely value-linked, since an incentive to pay more would conflict with the client's interest. Fixed amounts or models rewarding price discipline are therefore common.

Buy-side in the M&A sense should be distinguished from buy-side in capital markets, where it means the investing community of funds and asset managers as opposed to the sell-side of banks and research houses. For strategic buyers without an in-house M&A function the mandate replaces that capability. For financial sponsors it supplements their own origination with market access in a specific segment. In working the target list the outreach itself is the most demanding part, because mid-market owners are rarely ready to sell at the moment of first contact and a relationship must be built over time. An approach that starts not with an interest in buying but with a substantive reason has proven itself. Realistic assessment of the targets is also part of the mandate, since a buyer without sector knowledge otherwise risks overestimating the operational quality of a business.