Sell Side Research Services- An Outsourcing Perspective!!

Introduction

Sell-Side Research services are going through a paradigm shift. A recent survey of Buy Side managers
considers “Research” as an important element while deciding the investing avenues. At the same time, it
is assumed that “Research” would be bundled with the offering, without being paid for separately. This
leads to optimizing a loss leader, where controlling costs become as important as the depth of the
research.

Outsourcing sell-side research services present a compelling proposition. It leads to maintaining almost
similar quality while bringing in the savings in terms of operations’ cost.

In the article we will evaluate the various functional areas of Sell Side research that could be outsourced
effectively

Fund Raising Services

Buy-side managers are flooded with requests from all sorts of financial instruments and Fund Managers.
For smaller funds, the best chance of raising funds is from their personal network. Once those
opportunities are exhausted, more reach out could be outsourced for cost efficiencies. Also, for smaller
emerging managers, it takes quite some time to close the maiden funds. The best option is to carry on
with providing the returns to existing investors and improving the track record while attending all the
investor meetings that come their way. Success is hardly overnight. Outsourcing the fundraising process
saves precious dollars of a smaller fund while still maintaining the reach-out process effectively.

Sell-Side Research- Corporate M&A

Sell-side research in corporates revolve around M&A. Carving out a division and finding a suitable buyer
for the division is a typical sell-side research assignment. Here, the companies that might be interested
in buying the said business is researched, depending on the synergies that the business division offers.
Once companies are identified, the personnel list is drawn to finally commission a reach out to set up
meetings. A business division depending on its financial performance could be sold anywhere between 6
months to 2 years. Valuations are driven by situations, markets, and negotiations.

Sell-Side Research- Investment Banks

Equity Research coverage forms the backbone for Sell-side research and analysis at Investment banks.
Equity research reports are prepared with all the relevant information on the stock related to past
financial performance, future financial projections, industry, economy, and other quantitative and
qualitative factors. All the analysis leads to the recommendation in terms of Buy, Sell, or Hold for the
stock.

Sell-Side Research Platforms and Market Makers

For the research services for platforms, all the administrative services could be potentially outsourced
along with the technical aspects of managing a website or an app where the transactions take place

Stocks, Bonds and Foreign Exchange Sell-Side Research

Stocks, Bonds, and Foreign Exchange are the assets that are most traded across the globe. Quantitative
and qualitative analysis along with macroeconomic or sectoral research could be potentially outsourced
by the Sell Side Managers

Sell-Side Research- Private Equity and Venture Capital

When we talk about Sell-side in the Private Equity or Venture Capital industry, we are talking about
further rounds of fund-raising or exiting a portfolio company for various reasons. The exits could also
happen via IPO or an M&A with a bigger player. Here research plays a vital role in finding the investor or
the M&A suitor. The analysis and documentation support can also be outsourced

Sell-Side Research- Real Estate

Here the sell-side research is mostly concerned about raising funds or selling the assets that may have
completed their financial lifetime for the original investor

Across the types of Sell-Side managers, the following services can be effectively outsourced without any
dilution in the quality

Company Profiling and Analysis: These may be the companies that may be suitable for M&A.
Preparation of profiles by a third party also leads to unbiased views. A typical company profile includes
meeting notes, earning analysis, business strategy, company overview, markets, management, and
valuation

Thematic Research
A thematic research report explores a specific sell-side market. It carries all the details about the market,
major players, innovations taking place, its future, and the scope of the play. Thematic research also
builds on inputs from the experts in those areas. Expert interviews are conducted to uncover the
insights not available in the secondary domain.

Pitch Book

Pitch books are created to pitch the sell-side offerings. Pitch books are assisted for the design that
complies with global financial standards. Well researched content is also prepared from the client’s
feedback and market study

Fixed Income Securities Analysis

Analytics services to calculate various scenarios of returns for securities is a typical assignment. The
scenario analysis of interest or returns changes could be built into the model to showcase the security
analysis. Other quantitative and qualitative research can be effectively outsourced.

White Paper and PoVs

White Papers and PoVs are effective marketing tools for fund-raising. It shows the command of the
Asset Manager on the market and the shape that it is going to take in the future. White Papers and Point
of View documents are circulated to investors regularly for fund marketing. A well-researched and well-
designed white paper goes a long way in creating a great impression. The research for these marketing
materials could be effectively outsourced.

Mergers and Acquisition Support

M&A support span through list building, company profiling, due diligence, detailed due diligence, data
room management, and post-merger integration. Much of the data-intensive work could be effectively
outsourced to bring down the cost of acquisition. These projects are usually taken up by Investment
Banks and Corporates looking for M&A.

Financial Modeling

Financial Modeling is an essential step to find out the valuation of the asset that the sell-side has to
offer. A great financial model builds on reasonable assumptions and is flexible to take feedback from all
stakeholders. This goes a long way in convincing the buy-side managers about the attractiveness of the
deal. A financial model can be effectively outsourced to a competent agency that has experience in the
space

Lead Generation Support

When an ideal profile of a buyer is shared, the outsourced team gets busy with finding similar firms, and
within those firms, the relevant personnel who may be of interest to pursue further. These leads could
be actioned as well, by the outsourced team. The result is setting up of relevant meetings for the sell-
side to sell its offerings.

CRM

All funds that want to be in touch with all their potential investors use effective CRM to distribute fund
documents, fund performance, newsletters, market reports, and other knowledge documents. A well
maintained CRM is key to be in the eyes of investors continuously. The CRM needs to be populated with
the relevant leads and pruned for irrelevant or outdated ones. The outsourced team delivers on this
effortlessly. Also delivered are the knowledge pieces or white-labeled content that could be distributed
to investors periodically

Structured Product Research

Marketing Documents, PoVs, and Business case or Investment case are prepared that are customized as
per the client’s requirements.

Real Estate and Commodities Reports

A well-written report dealing with a GP’s area of expertise in Real Estate or commodities is not only
useful from a marketing point of view but is also critical for creating trading strategies. A templated
report for Real Estate and Commodities could very well be delivered by an outsourced team. All the
content delivered is white-labeled and can be branded as per the client’s requirements.

Sell-Side Equity Research

Equity research using DCF modeling and comps is done to arrive at the stock price and the
recommendations, to buy, sell, or hold. An outsourced team could track far more stocks than an internal
team and can go into more depth. Tracking more stocks improves the sell-side decisions

Regulatory Reports

In markets where a regulator plays a vital role, regulator reports are critical for operation. Any new law,
new regulatory changes, or compliance requirement is analyzed in detail in the report. The report also
suggests the recommended business action to take advantage of changes or avoid complications.

Confidential Information Memorandums/ Private Placement Memorandums

CIM or PPM and pitch decks are the most widely used fund documents. They serve an important
marketing function but at the same time need to comply with regulatory standards. An experienced
outsourced team could deliver on the requirements that are comparable to global standards of fund
documentation

Macro-economic and Sector Reports

Macro-economic reports are prepared for geographies where the sell-side is interested. Sector reports
are made for the specialized sectors for the Sell-side. Both these types of reports could either fulfill the
Marketing or Strategy requirements of the Sell-side.

Coverage Reports

These are specifically customized reports covering a set of stocks or industries.

Magistral Consulting is a specialized research and analytics agency that has helped multiple sell-side
firms in the US, UK, Europe, and Australia in outsourcing operations and delivering cost savings. To drop
a business inquiry click here.
About Magistral
Magistral Consulting has helped multiple funds and companies in outsourcing
operations activities. It has service offerings for Private Equity, Venture Capital, Family
Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real
Estate, REITs, RE funds, Corporates and Portfolio companies. Its functional expertise is
around Deal origination, Deal Execution, Due Diligence, Financial Modeling, Portfolio
Management and Equity Research

For setting up an appointment with a Magistral representative

visit www.magistralconsulting.com/contact

About the Author

The Author, Prabhash Choudhary is the CEO of Magistral Consulting and can be
reached at Prabhash.choudhary@magistralconsutling.com for any queries or business
inquiries.

Confidential Information Memorandum/ Private Placement Memorandum

CIM or PPM is a document that carries in detail all aspects of the offering or the asset that is intended to
be sold. CIM and PPMs are assisted with, in terms of content and design. In content, the originally
researched and conceived content is put by the sell side research analyst in the CIM and PPM. It is then
checked for editing and flow. Once the content is nailed, the design is improved using multiple design
software products to improve its look and feel.