What Does Sell Side Mean?
Sell side advisory services are provided by investment bankers to companies that are in a sale process. In general, these services include the preparation of the marketing documents, the valuation of the company, the identification of and negotiation with potential buyers, and the closing of the transaction. Investment bankers typically provide these services on a success fee basis, whereby a percentage of the total enterprise value is paid only if the business is sold.
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Divestopedia Explains Sell Side
The advisory services industry is not regulated, so entrepreneurs must ensure they select their sell side advisory team carefully. Investment bankers may want to collect a quick fee by immediately presenting the company to an existing buyer who may not be the best fit. Therefore, the seller must ensure that the specific sell side services are detailed in the engagement letter. At a minimum, these services should include:
- Conduct a comprehensive analysis of the seller's needs and objectives to construct a potential buyer list that fits the seller profile;
- Manage the initial interest stage by preparing an attractive teaser that gets circulated to a large number of potential buyers;
- Prepare a Confidential Information Memorandum (CIM) that adequately presents the strengths and opportunities of the business;
- Conduct a preliminary valuation of the company to weight against the valuations of interested buyers;
- Develop a comprehensive buyer list that matches the seller's needs and objectives;
- Evaluate all proposals, review the letters of intent and select the purchaser;
- Be the project manager for the due diligence; and, finally,
- Work with the legal, tax and accounting advisors to close the transaction.