By Tara Hasssan, Raymond James Ltd.
After getting a few years of operational experience under my belt, I made the move to the finance side of the business. At the time, I knew I wanted to be involved in the process of helping to fund and advance projects. However, the ins and outs of how all the pieces of the brokerage/investment banking business came together to achieve this was a bit nebulous to a mining engineer who had spent her time at operations run by large companies.
Despite what the Hollywood movies might suggest (see Wall Street, Wolf of Wall Street), the Sell Side of the business isn’t all just about the big shot investment banker or some lone sales guy controlling a market (or non-stop bottles of champagne, much to my disappointment!). It’s about a mix of groups that all have a role to play in helping companies to evolve and grow, in part by making connections to the Buy Side (institutional and retail investors). Below is a quick guide to understanding the players on the Sell Side and what role they play.
Equity Research Analyst
Typically known as the propeller heads of the operation, you’ll commonly find former mining engineers/geologists/other technical sorts in these seats. The role of the Analyst is to provide financial and technical analysis on companies which then gets distributed to the sales/trading desk and the Buy Side investors (institutional and retail clients). You’ll find the analysts equally at home kicking rocks on site visits as they are in front of an excel file with way too many worksheets. Analysts will generally actively cover anywhere from 10-20+ companies, but are always on the lookout for the next good company/discovery.
Sales and Trading Desk
These are the men and women hitting the phones/emails/tweets/grams etc. to follow on the research product and find out what their Buy Side clients are buying and selling and what they’re looking for in new investments. The trading desk is generally the most in the know on how stocks are trading, what blocks are available and general market trends. The sales desk, while also up on the trade picture, spend most of their days meeting/talking to clients (both investors and corporates). Their main focus is to generate trade through these conversations. This part of the organization is who you look to in order to best get the buzz of the street and will be the most involved in marketing a company to the Buy Side.
The bankers are the ones who will pitch ideas on funding sources and M&A opportunities. As they’re always looking for new ideas, they spend a lot of their time meeting new and existing corporate clients. This group is on the other side of what we call the ‘Chinese Wall’, a device implemented to restrict the flow of information between Investment Banking and research and sales/trading to ensure there’s no influence relating to potential equity or M&A deals.
Combined, these three groups outlined can be instrumental in helping a public company grow through access to investors, generation of trade, access to capital sources, and M&A ideas. It is important for public companies to establish relationships with all of the different groups, as each can help to play a distinct role to help advance companies, and at points, some may play a more important role than others.
Understanding your objectives as a company will also help determine who you target and at what firms. With some firms specializing in earlier stage companies and others spending their time focused on the producer end of the spectrum, there can be advantages to developing a relationship with the most well-suited firms. Most notably, these firms most likely have better intelligence and client-reach for the specific stage of company, which stands to increase your chances of success.