The Buy-Side vs. The Sell-Side: The Worst Way to Categorize Finance Firms?

“Yo, you’ll make bank when you move to the buy-side! Screw this stupid investment banking job.”

“Yeah, I heard everyone at hedge funds makes at least $1 million and gets a castle as their signing bonus.”

“So when’s your interview?”

Ah, yes: that classic debate about the buy-side vs. the sell-side. Although the conversation above is fictional, similar exchanges are taking place in cubicles across the world as you read this.

You hear about the buy-side vs. sell-side distinction everywhere, whether you search online, browse through you message boards, or even (gasp) talk to people in real life.

The only problem is that “buy-side vs. sell-side” is the worst way to categorize financial services firms.

From Boutique to Middle-Market to Bulge Bracket: Got Rankings?

“Can you please rank the banks?!! Please! Just this once, rank the banks!!!”

“If I buy you bottle service, will you rank the banks? It’s on me, really!”

No, no, and no. Ranking anything is my least favorite topic in the world – possibly because I spent the first 20 years of my life attempting to out-rank people to get into more prestigious schools and activities.

But I will acknowledge the differences between different types of banks, and that it’s more complex than the previous discussions of boutiques vs. bulge brackets.

If you’re looking for rankings, you should press Alt + F4 right now and end your suffering.

But otherwise, read on and learn all about different types of banks, from tiny boutique to bulge bracket and everything in between – and where you should work.

From Cold Call to Closed Deal: How a Private Equity Investment Comes Together, Part 3 – The Dotted Line

“She thinks $60 million is a discounted price? Can someone shoot her with an animal tranquilizer gun until she snaps out of it?” John says, looking around in disbelief at all the other Partners.

David turns to you and his eyes light up as a new idea percolates to the top of his head, and then sputters out of his mouth.

“You do know about the special analyst bonus, right?”

Everyone else in the room laughs, as you contemplate whether or not they really want you to tranquilize the CEO.

$60 million would be 6x EBITDA – a reasonable price for a larger company – but significantly higher than what you’d pay for a small, Founder-dominated business in a niche market.

David speaks up once again as the laughter subsides.

“And let’s not forget about her other demands: she wants to roll over 20% of her ownership and put aside 5% in an options pool for the management team.”

“So we’re paying for an overpriced business and then giving up 25% for no apparent reason. This sounds like a better investment than finding Google in 1998,” John replies while rolling his eyes.

Everyone else sits there in silence as you weigh your options before speaking up.

“Well,” you say, “On a positive note, I think I could call in a few chips to get the financing in place.”

“What bank would even look at this? It’s too small for any of the usual suspects,” David points out.

“Right now everyone’s desperate for business – in normal times they’d say no, but beggars can’t be choosers.”