Sell-side versus buy-side

What each side is optimising for

A seller wants the highest price, the most cash at completion rather than deferred, the fewest warranties and the shortest tail of liability, plus certainty that the deal closes. Price is only one of five, and sellers who focus solely on it routinely accept structures that deliver a smaller amount later with more risk attached.

A buyer wants to acquire something that fits their strategy at a price that works, with protection against what they do not yet know, and with the seller's continued involvement where the business depends on it. Their central problem is information: they know materially less about the business than the seller does, and the whole architecture of diligence, warranties, indemnities and escrow exists to manage that gap.

Recognising the asymmetry explains most buyer behaviour. Requests that feel intrusive or distrustful are usually attempts to price uncertainty, and a seller who reduces the uncertainty directly reduces the protection the buyer needs to demand.

How a sell-side process is designed

The adviser's job is to manufacture competition and control information flow. Preparation ensures the business can withstand scrutiny; a buyer list is built across trade, financial and international buyers; approaches are staged; and a timetable is imposed so that offers arrive together rather than sequentially.

That last point is the whole mechanism. Offers received simultaneously can be compared and played against one another. Offers received one at a time cannot, and a seller negotiating with one interested party at a time is not running a process — they are responding to approaches.

The other core discipline is releasing information in stages: a blind teaser, then an information memorandum under NDA, then the full data room only after an indicative offer. Give everything at once and you have handed detailed competitive intelligence to parties who may include competitors with no serious intention of buying.

How a buy-side mandate works

Buy-side is a search rather than a process. It begins with criteria — sector, size, geography, capability sought — then builds a universe of targets, approaches them, and works largely with businesses that are not formally for sale.

That is the defining advantage. A proprietary approach to an owner who has not appointed an adviser avoids the auction dynamic entirely, and buyers consistently pay less in bilateral negotiations than in competitive processes. The trade is time: most approaches go nowhere, and a buy-side mandate can run a long while before producing a single live conversation.

Buy-side advisers also assess fit and prepare integration thinking before completion — because the value in an acquisition is realised afterwards, and acquisitions fail on integration far more often than on price. Practical routes for South African acquirers are in buy a business in South Africa.

Where leverage sits, and how it moves

Leverage is not fixed. It travels through the transaction, and knowing where it is at any moment is most of the skill.

Before exclusivity the seller holds it, provided there is genuine competition. Multiple credible parties is the only real source of seller leverage.

After exclusivity it transfers to the buyer, comprehensively. They have time, an investigation underway, and the seller has no alternative.

During diligence it moves further toward the buyer with every finding, because each one is a reason to revisit terms.

At warranty negotiation it depends on who is more willing to walk — which by that point is usually the buyer, having spent months but not yet money the seller has come to count on.

The practical implication is uncomfortable and worth stating plainly: the best terms a seller will ever be offered are generally available just before exclusivity is granted. Everything negotiated afterwards is defence.

Why the same adviser cannot act for both

The interests are directly opposed on price, structure, warranty scope and the disclosure of adverse information. An adviser who knows the seller's minimum acceptable price cannot honestly advise the buyer, and one who knows the buyer's maximum cannot honestly advise the seller.

Firms do act on both sides across different transactions, which is normal and useful — running both mandates builds a view of what each side will accept. What matters is that the sides are separated within a single deal, and that any prior relationship with the counterparty is disclosed at the outset rather than discovered later.

How buyers are actually shortlisted

Sellers often assume the highest number wins. In practice a good adviser weighs four things, and price is only the first.

Deal certainty. Does this buyer have the money, and does it need anyone else's approval? A funded trade buyer at a lower price frequently beats a higher offer contingent on financing that has not been arranged.

Structure. How much is cash at completion versus deferred, and what conditions attach? Covered in earn-outs, escrow and warranties.

Speed and process risk. A buyer who has completed similar transactions moves faster and renegotiates less. A first-time acquirer, however enthusiastic, carries real execution risk.

What happens afterwards. For many owners this is not sentimentality but a commercial issue: staff who leave, customers who depart, and earn-out targets that then fail. If part of the price is deferred, the buyer's competence becomes the seller's problem.

Which side you are really on

A question worth asking, because it is not always obvious. An owner selling a minority stake to a growth investor is running a sell-side process even though they are not selling the business. A business acquiring a competitor to consolidate is buy-side even if the approach came unsolicited. A merger of equals is, in practice, almost always a sale in which one party's shareholders end up with the smaller share.

Naming the position correctly determines the process design, and processes designed for the wrong side of the table produce predictably poor outcomes.