The core idea
The sell side helps companies raise money, advises on deals and makes markets in securities. It earns fees and commissions. The buy side invests money, its own or its clients', in companies and securities. It earns returns and management or performance fees.
A simple way to remember it: the sell side sells securities, advice and services; the buy side buys them to invest.
Sell-side firms and roles
- Investment banking: M&A advisory, and raising equity and debt capital for companies.
- Sales and trading: buying and selling securities for institutional clients, and making markets.
- Equity research: publishing analysis and ratings on public companies for investors.
- Brokerage: executing trades on behalf of clients.
Examples include large global investment banks, middle-market banks and boutique advisory firms.
Buy-side firms and roles
- Private equity: buys whole companies, often with debt (leveraged buyouts), improves them and sells them, typically over several years.
- Hedge funds: invest in public and private securities using many strategies, often with shorter time horizons.
- Asset managers and mutual funds: manage portfolios of stocks and bonds for individuals and institutions.
- Venture capital and growth equity: invest in younger, fast-growing companies.
- Institutional investors: pension funds, endowments, sovereign wealth funds and insurance companies, which invest directly and through funds.
How they differ day to day
| Sell side | Buy side | |
|---|---|---|
| Main goal | Complete transactions and serve clients | Generate investment returns |
| How it earns money | Advisory fees, underwriting fees, commissions, spreads | Management fees and a share of profits (for funds), or investment gains |
| Work style | Client service, many deals, tight deadlines | Fewer, deeper investment decisions |
| Key question | “Can we get this deal done well for our client?” | “Should we put money into this?” |
| Typical entry route | Undergraduate analyst programs | Often after 2–3 years on the sell side, though more firms now hire directly from college |
How the two sides work together
The two sides depend on each other. When a private equity firm (buy side) wants to buy a company, it often meets the investment bank running the sale (sell side) and hires another bank to arrange the debt. Hedge funds trade through sell-side desks and read sell-side research. Many careers cross the line: a common path is two years as an investment banking analyst, then moving to private equity.
Interview angle
If an IB interviewer asks about your long-term goals, it's fine to be honest that the buy side interests you eventually, but make clear you want to master the analyst job first. Show you understand that banking skills, like modeling, valuation and deal process, are exactly what buy-side firms look for.
Build the skills both sides hire for
LBO modeling is the bridge from banking to private equity. Start practicing for free.