Pros and Cons of the Industrials Group?

Would like some of your perspectives on pursuing a career in the industrials IB group (assume that you are a 1st year MBA looking to choose a group as a career)...

Would like your thoughts on cyclicality, stability of deal flow, M&A activity, sponsor related activity etc. I've noticed that Industrial groups are usually very large (2nd only to the FIG group...) - is that usually a good thing or a bad thing from a career perspective?

 
Best Response

It's difficult to generalize the industrials group as a whole because the group itself is usually very large and split into several verticals (ex. aerospace & defence, building products, automotive, packaging, steel, transportation, waste, diversified and so on etc.), with each vertical having its own unique characteristics. But I'll give it a shot nevertheless:

  • Industrials in general gives you a very broad exposure - the modeling is generalist and straightforward, and very transferable (in case you get interested in "exit opps" down the line).
  • Generally sponsor-heavy because most of the companies in the industrial sector have stable cash flows and are therefore good LBO targets.
  • M&A activity is decent and relatively stable because there are several fragmented sectors that are actively consolidating.
  • Lots of debt/loan related activity (due to high presence of sponsors), and because industrial companies usually have a lot of tangible assets (that banks can collateralize for debt)
  • Not as much ECM activity in industrials - if there are, it's usually some form of sponsor-backed exit.
  • Not sure on this, but in my opinion, might be easier to "specialize" as a career banker just because industrials is a huge sector with lots of niche sectors (and even sub-sectors) within it.

Can't comment on cyclicality or stability of the industrials sector as a career - if you're really concerned about job stability, not sure if you should be aiming a career in IB in the first place. Group-wise, I'd say FIG, Healthcare and DCM in general would be most "stable" in terms of dealflow in a recessionary period.

Hope this helps.

Array
 

Thanks @Highly Leveraged." This might be a bit much to ask but would you be able to elaborate more on the characteristics of the different subsectors within the industrials group?

Also would like input from anyone regarding the stability of Industrials IB as a sector. Thanks!

 

Question: Is Industrials in general a cyclical sector in terms of IB dealflow? Or does industrial companies have relatively stable dealflow (compared to other sectors?)

 

Again, not actually in Industrials but from what I know it is a relatively stable sector. Fewer companies with unproven technologies (compared to say, biopharm) means the industry as a whole is pretty stable, plus many Industrials companies are good fits with each other for consolidation in times of economic distress. Sector as a whole is generally less dependent on equity raises so when the markets are down it's not as big of an issue.

 

Things may be different in the MM, but larger M&A transactions in the Industrials space were largely driven by financial sponsor activity. Those have dried up for now, but after a while we will start seeing an uptick in deals related to sponsors cutting portfolio companies loose.

 

I seriously doubt Industrials will be dead in ten years. American manufacturing is still very much alive and well; they're just not making gears and steering wheels anymore. They make aircraft and crazy infrared sensors and liquid-cooled CCD cameras and tiny solar panels and gyrostabilized long-range missile tracking systems. Whenever you need serious precision and skill in manufacturing, that manufacturing will often take place in Europe and the U.S. Additionally, most deals touch New York even if Asian teams have a hand in it as well.

Industrials is also a lot more than manufacturing in many banks. It also includes engineering, development, and services such as transportation and logistics. The recently deceased and highly publicized Delta/USAir deal went through the Industrials segments of the respective banks. So did the spinoffs of Travelport (a travel services company) and Realogy (a real estate business).

 

is right. Industrials at most banks include steel, plastics, mining as well. It's so diverse that even if one sector within industrials is slow/not exciting, you can always be involved in something more that you like. I think it's one of the best coverage groups to be in the number of different companies you'll see. However, if you're at JPM or GS, then TMT is defintely better since it's very broad and more 'sexy'.

 

Bear in mind that many automotives are covered out of Chicago offices. If you're interviewing in New York, they probably don't want to hear about GM.

Instead, check out GE -- huge financial segment throwing off valuation. Defense and aerospace has been interesting; do a newsrun on Boeing, Airbus, Lockheed Martin, Raytheon. Recent transactions in the defense space include Boeing/Aviall, General Dynamics/Anteon. Also check out recent Rockwell and Siemens activity. If they have a global focus, look at Snecma. For DI transactions, check out Rexnord/Apollo and Flender/Siemens.

Other firms of interest right now would be Regal-Beloit (post-GE HVAC acquisition), Danaher, R.R. Donnelly, Millipore, ITT. These are just a handful, obviously. The space is HUGE.

 

The advice has been really helpful so far. Just FYI, I am interviewing with the Chicago office. What about Metals & Mining (besides Mittal-Arcelor which I suppose is old by now) etc. Please keep it coming. The more the better.

 

i can't really speak to rank, but i'm in this group and obviously at one of the banks i mention so i'm staying out of the ranking argument....

I searched Factset for total deals announced by value and included the Industrials component SIC codes.... here is what I got..... (dont shoot the messenger, weird results on some of those placings, someone let me know if they find a different result)

1 MS 2 UBS 3 Lehman 4 Lazard 5 Credit Suisse 6 JPM 7 GS 8 China International Capital Corp 9 Citi 10 DB 11 ML 12 Rothschilds . . . . .

 
x35109:
i can't really speak to rank, but i'm in this group and obviously at one of the banks i mention so i'm staying out of the ranking argument....

I searched Factset for total deals announced by value and included the Industrials component SIC codes.... here is what I got..... (dont shoot the messenger, weird results on some of those placings, someone let me know if they find a different result)

1 MS 2 UBS 3 Lehman 4 Lazard 5 Credit Suisse 6 JPM 7 GS 8 China International Capital Corp 9 Citi 10 DB 11 ML 12 Rothschilds . . . . .

under the impression that GS had the best group?

or so i heard on this board previously (take it for what it's worth -- probably not much)

 

X35109, without revealing the bank that you work at, I'm curious about what impressions you get regarding the strong players in this space

 

think about it like this...

most industial deals are for huge clients (think airlines, defense, transportation, basic materials, chemicals, and companies like GE, 3M, and so on...)

sometimes those companies do small debt offerings or whatever, but often times those companies are involved in HUGE transactions (think BHP-RIO). so think about which comapnies based on their size, location, and balance sheet or lack thereof would be able to underwrite a lot of those huge deals and compete to win the business.

you can't go wrong with GS, JPM, MS, Citi, DB, UBS, ML, CS

send me a PM if you want to know more about a sepcific group... i intereviewd at a lot of those places.

 

Folks,

I have soon an interview with the "big boys", MD, ED and VP (staffer). Any thoughts? What would be their focus in the interview? I assume more fit/behavioural questions and my experiences rather than pure technical staff?

Please share your thoughts.

Thanks.

 

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