Quick Answer
In shared due diligence activities, the sell-side prepares information and access while the buy-side reviews the target. Other tasks belong to one side: the seller investigates potential buyers through reverse due diligence, while the buyer evaluates the target's leadership, risks, and potential cost savings.
The table compares eight topics in an M&A transaction: financial review, data room work, management presentations, site visits, reverse due diligence (DD), background checks, risk discovery, and cost-saving identification. It does not mean both sides perform every task. Some activities involve both sides in different roles; others are assigned to one side in the Series 79 outline.
How Do Due Diligence Tasks Split by Side?
| Workstream | Sell-Side Banker | Buy-Side Banker |
|---|---|---|
| Financial DD focus | Diligences the seller (internal) | Diligences the target (external) |
| Data room | Builds, indexes, manages access | Consumes, queries, follows up |
| Management presentations | Prepares the seller and presents to buyers | Coordinates the schedule with the buyer and the target; attends and probes |
| Site visits | Hosts on the seller's behalf | Coordinates the schedule with the buyer and the target; attends and inspects |
| Reverse DD | Diligences the potential BUYERS (ability and willingness to close) | Not the buy-side banker's role |
| Background checks | Generally not the seller's focus on its own people for the deal | Performed on TARGET leadership |
| Risk discovery (off-balance-sheet, unfunded liabilities) | Prepares for buyer questions; remediates if possible | Surfaces them to inform price and negotiating position |
| Cost-savings identification | Not a sell-side workstream | Yes (consolidation and negotiation synergies) |
Think of it this way: For shared tasks, the sell-side BUILDS and HOSTS while the buy-side READS and INSPECTS. Reverse DD is different: the seller investigates potential buyers' ability to close. The buy-side instead investigates the target, including its leadership and risks, to inform the purchase decision and negotiations.
Exam Tip: Gotchas
- Reverse DD is sell-side only. If the question says the banker is investigating the buyers, that's the sell-side banker. If the question says the banker is investigating the target's leadership, that's the buy-side banker.
- Background checks are buy-side only on TARGET leadership. The sell-side banker doesn't do background checks on the seller's own executives for the deal.
- Cost-saving identification is buy-side only. The synergy case is the buyer's argument for paying a premium; the seller already runs the business.
- Data room verbs flip. Sell-side BUILDS, INDEXES, and MONITORS access. Buy-side READS, QUERIES, and FOLLOWS UP.
- The buy-side banker coordinates the schedule. Scheduling management presentations, data room access, and site visits is a buy-side workstream, arranged with the buyer and the target. The sell-side prepares the materials and provides access; it does not own the buyer's schedule.
Why Do the Two Sides Approach DD Differently?
Both sides serve clients who want the deal to close, but they want different things to be true at closing:
- The seller wants the highest price that will actually clear (closing certainty)
- The buyer wants to pay no more than the business is worth after diligence findings (price discipline)
These different goals produce different DD priorities:
- Sell-side priority: Anticipate every issue a buyer might raise, prepare a clean response, and ensure the eventual winning bidder can actually fund and close (reverse DD)
- Buy-side priority: Surface every issue the seller didn't volunteer, quantify the cost, and convert findings into negotiating positions (price chips, indemnities, escrows, working-capital adjustments)
Think of it this way: The sell-side banker walks into DD asking "what could blow this up and how do we defuse it?" The buy-side banker walks into the same data room asking "what's the seller minimizing and how do we use it?"
Exam Tip: Gotchas
- Both sides do due diligence on the same deal, but with different goals. The exam may pair a fact pattern with "which side's banker does this?" to test the workstream distinction.
- The seller's banker is the buyer's interface for documents and presentations, but the seller's banker is ALSO investigating the buyers in parallel. A question that hides the reverse-DD workstream behind a vendor or financing question is testing whether you remember it exists.
What Should You Check on Exam Day?
- Confirm which side a fact pattern describes before matching a workstream: builds/hosts language points sell-side, consumes/inspects language points buy-side.
- Check that reverse DD, cost-saving identification, and background checks are attributed to the correct single side (reverse DD and closing-certainty goals to sell-side; background checks and cost savings to buy-side).
- Match "risk discovery" language (off-balance-sheet items, unfunded liabilities) to the buy-side banker surfacing it, not the sell-side banker who is preparing to answer for it.
- Distinguish the seller's goal (closing certainty at the highest price) from the buyer's goal (price discipline after findings) when a question asks "why" a side takes an action.