M&A Sector Groups - Differences and Effects
WSO Users,
I would be grateful for any advice/insight regarding the nuances between sector groups (Consumer Retail and Healthcare, TMT and Industrials, FIG) for M&A analysts.
Do the type of modelling and deals affect your learning experience and, if so, how? (For e.g. in FIG analysts may gain broader/deeper modelling skills due to the nature, variety and complexity of financial institutions).
Are there specific trends in each sector that experienced analysts would highlight as particularly interesting / relevant?
I do not believe that this has been addressed in other forums. Please forgive me if I am mistaken.
Thanks for any help!
FIG modeling is wildly different from modeling in any other sector. It is certainly a unique skill to pick up but not really applicable anywhere else. If you do too many FIG deals, you can get pigeonholed very quickly.
Depending on the specific case, modeling for growth companies (e.g. TMT or Biotech) can be different than modeling for mature companies (e.g. Chemicals or Metals & Mining). Alot of growth companies are relatively unsophisticated and won't have too many lines in their financial statements, whereas mature companies have usually been around for a while and have accumulated all manner of accounts (pension liabilities, treasury stock, etc.). For growth companies, the assumptions behind the top-line projections are alot more important than projecting COGS (as an example).
Furthermore each sector has various nuances than usually must be taken into consideration. For example, alot of Chemical companies make commodity products. As such, revenues and COGS can fluctuate wildly depending on the market pricing of their products and raw materials (a function of capacity over/under supply). As a means of correcting for this, historical figures are usually normalized so projections based on those figures are more scientific.
If you search [insert sector here] investment banking, Mergers & Inquisitions interviews people in various sectors and discusses the nuances of modeling companies in those sectors.
Hope this helps!
Thank you, Draper!
It would be great to hear what experienced analysts have particularly enjoyed / found rewarding while working in specific sectors. (For e.g. in Nat Res analysts may enjoy following commodity prices and geopolitical news).
In the meantime, I will go and do some more homework!
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