Structured Finance IB --> M&A / LevFin

Sorry rough week so just getting around to responding here now… haven’t heard much about banks lumping SF & M&A/LevFin together. Maybe because they’re product groups & not coverage though? Doesn’t matter regardless. I haven’t seen the jump & said it’s an uphill battle because of the nature of the SF work. At the end of the day, SF is securitization, a bankruptcy remote product that is reliant on the underlying cashflows of assets & the asset value itself to repay debt.

Your SF modeling/structuring is consistent of looking at data tapes, developing asset replines, and adding in some scenarios (prepayments, defaults, liquidations, recoveries, etc). Very simply put, you are determining how much cash is available from asset generation to pay expenses, fees, interest & principal while maintaining enough cash (or collateral) to withstand certain sets of criteria (e.g. overcollat. or LTV). From a pure structuring standpoint, you’re probably doing all the modeling I mentioned above, but referencing existing deals to build a new model around. Also running breakeven analysis based on rating agency criteria, or certain investor request runs.

M&A/LevFin inherently is much more of a corporate analysis. In structured, you’re not going to get the reps from an accounting standpoint or a corporate modeling standpoint (think how do the 3 statements flow together, how do I forecast & build revenue based on scheduled capex, what are my EBITDA add backs, never mind actual merger models, LBOs and other types of modeling). I’ll prob get MS for this, but I’d actually be more inclined to take someone from transaction advisory or a rating agency corporates analyst who’s spend time in the weeds of account statements before an SF banker. On the flip side, give me a SF rating agency kid over someone who did a year in an IB coverage group. The framework of thinking (to me) is too different & with that the passion for the work varies too much.

Nothing is impossible, but in my opinion it’d be a super difficult jump. Maybe if you’re a SF associate you could hop to an analyst position but are you really going to want to do that? It’s a pay cut & you’re low man on the totem pole again after grinding up to associate.

As a last piece of advice I would say SF is a really interesting & awesome field if you’re passionate about the work. If your goal is exit ops, there are plenty of great big name funds with structured investing arms as well as niche players on the buyside & they all want strong SF modeling experience which you’d get in a structuring role. Also might have the option to hop over to the insurance, pension or SWF money side as all are players in certain assets. The space is smaller & niche, but growing & becoming a rapid part of financing (which in turn means a rapid part of investing).

Let me know if you have follow ups.