Sell-side analyst vs buy-side analyst

No, I’m not writing a list of things to compare them generally. I’m just sharing one key difference when I was in sell-side and buy-side.

When I was in M&A, I made powerpoint presentation to show the valuation of the company. You did it the first round based on some assumptions. Then assumptions changed. You revised the valuation in Excel, and copy-and-paste to powerpoint. Many tables and charts. Then assumptions changed again. You revised and copy-and-paste again. After few rounds, all assumptions seemed alright. BUT, the director wants to sell at higher price later. So, you revised the assumptions to achieve the valuation your boss wanted. Then he wants the charts bigger, some fonts bigger, to use different color, shift the slides around, and you’d have to do the formatting and copy-and-paste again. Then, the client wasn’t happy with the price and wanted to sell higher. So, you revised the assumptions again. Then to avoid being excessively bullish, you create bear case, base case and bull case, each with different set of assumptions, charts, tables and caluation. In my case, it went over 20+ rounds. So, 20+ versions of the Excel and powerpoint, with each version keeping its own set of assumptions. I saw my colleague keeping 20+ versions too.

Your powerpoints must be error free. No mis-spelling, no wrong data, tables and charts are nicely formatted. Sell-side analysts in Research may not have to change their assumptions that many times. But again, when you have 10 charts and 10 tables in the report, a single change in assumption or careless typo will require you to do copy-and-paste the charts/table all over again. As the report will go out to clients, they must make sure it’s error free, no mis-spelling, perfect grammar. Being organized helps a lot. After a while, you’ll learn to be more organized as time passes.

Being a buy-side analyst in hedge fund, I don’t to do much on powerpoint formatting, creating nice charts/tables, or checking if it’s mis-spelling free and grammar perfect. We do have to make sure the data is accurate, facts are right and valuation correctly done. Therefore, the focus is more on getting the valuation right with good reasoning, and less on beautifying the presentation.

My friend in Private Equity has to do presentation on weekly basis. But, it’s internal presentation and he focuses less on beautifying it to impress people, but more on the substance of the content, the accuracy and reasoning. Buy-side analysts also do valuation based on what they think make sense (objective, independent judgment), not by changing assumptions to achieve certain price target set by higher up or by client.

To me, that’s one important advantage of being a buy-side analyst. I lack the talent to beautify the presentation and don’t bother with the minutae of small/larger font/chart size, brighter/darker color, bullet points spacing, etc.

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