Comments (71)

Jun 16, 2010

I work in the industry... as in, for a major aerospace company as an engineer.

You're probably looking for a banker focusing on the sector?

Jun 16, 2010

aerospace and defense at a BB? and specifically aerospace and defense M&A at a bb? does this even exist? isn't this part of industrials?

Jun 19, 2010

why would you be asked about A&D specifically in an M&A interview?

what do you want to know about A&D specifically?

If you want to learn some basics about the industry read some research... if you don't have access then go read the MD&A section of some filings on the primes and guys like boeing... know something about production rates (recently hiked at boeing and airbus) and know something about OEM versus aftermarket suppliers and shit like that

Jun 19, 2010

^^^^ Dipset is a little more sophisticated than that bro. I am sure he has covered those bases. I was actually put in contact with a dude who does A&D at a middle market firm. Im not going to be able to get in contact with him in time to help. Sorry man.

Jun 19, 2010

You should prob look into the changes in the defense budget... from what I've heard, it's shifting from heavy weaponry and into more surveillance, recon, and intelligence... so that might be a good point to mention, the most recent S&P industry report was also a good source of background information

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Jun 19, 2010

I would not quote James in an interview. That is a grossly uninformed comment. The defense budget is complex and there are no sweeping summary comments you can really make about the budget.

Dipset may be "sophisticated" but his question seemed basic which is why he got a basic answer.

You know what, go ahead and walk in there and say what James told you, LOL. (what about aerospace, the question was about A and D, why are you just going to make an innacurate statement about D and not answer half of the question)?

If you want some tips on what to read up in A&D you can PM me.

There have been some transactions in Aero lately and those investor presentations have great info on the space. Since you are so sophisticated then you won't need me to point you to the transaction (public buyer, you probably already know it).

Jun 26, 2010

I don't know much about aero M&A, but here's my aero insight anyways. You're dealing with government contracts, private contracts, or both. Here's how the (aviation) industry works:
Private:
Commercial and general aviation. Commercial is all the big names, Boeing, Bombardier, Embraer, Airbus...
General aviation: Cessna, Cirrus, Beechcraft, Pilatus...
For the most part, the commercial guys make half their stuff, and contract a bunch of their stuff out to other companies - either general aviation trying to fill voids in their production capacity, or an "aerostructures" company - mainly specializing in composites, or some other "specialty" design/manufacture.
General aviation tends to make everything in-house.
Government contracts:
This is the interesting part. You have "prime" contractors - Boeing, Northrop, Lockheed. You also have non-primes that will bid for some of the same projects. When the government awards a contract, they will specify a prime as well as contractors that must be given contracts to make parts. This is akin to a 363 auction, where the stalking horse gets a payment for their due diligence if they don't win.
Since a lot of these contracts are research and proof of concept (DARPA or AFRL), there's economies of scale, since parts tend to be made in quantities of one to a dozen. For these smaller aerostructures contractors, location is key. Having a location out in middle of nowhere, middle America, where there isn't much industry will funnel tax dollars from the congressmen representing these areas.

Jun 19, 2010

^^^^^^what the fuck?

this explanation made me lol

GD is also a prime, right? (answer=yes)

How in the world is that akin to a 363 auction? The A&D suppliers out there win contracts from the primes while the prime typically integrate large programs/platforms. Not always that way, but thats a better explanation on the whole than that crap you just wrote above.

A better way to think about Aero is OEM versus aftermarket. Thats typically how most people classify what goes on in aero instead of bigger guys who make half their stuff (lol)

Jun 26, 2010

General Dynamics and General Atomics are both considered primes. Many of the contracts that they "win" are actually mandated by the group writing the contract (congress). These are often, but not always given to those who bid on the initial contract - this is my 363 reference.

Jun 19, 2010

is nothing like 363

general atomics is not a prime

Jun 26, 2010

Sorry, I'd consider the aerospace side of General Atomics a prime.

Jun 28, 2010

there is only one prime
-robert stevens

Jun 19, 2010

yeah, and its in my pants

Jul 1, 2010

hmmm, would working in this industry group hurt your chances of working at a HF after your two years since A+D stocks are usually stable?

Jul 1, 2010

you build transferable skill sets.

Jun 19, 2010

I wouldn't think working in A&D is the best for HF...

However, it just depends on how you pitch the experience you are getting. But I would say there are probably better places to leverage your resume up with stuff that's attractive to HF's

Jul 2, 2010

Interview is Thursday. Any help is appreciated

Jul 2, 2010

I heard space banking is out of this world!

Jul 2, 2010
iBankedUp:

I heard space banking is out of this world!

.

Jul 2, 2010

Last bump

Jul 2, 2010

Idk shit about space banking. But if you want some insights on A&D, check out KippsDeSanto's page. I've built models using their insight pages.

    • 1
Jul 2, 2010

Very helpful, thanks! I knew they were a major player but didn't think the site would have as much info as it does

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Jul 2, 2010

It looks like you laid out the whole plan - is there a question in there somewhere? You've got your shit together regarding the role you want.

But.

Do you realize that the vast majority of people working in the organizations you are interested in have horrid bureaucratic jobs and eventually come to hate this government and or country? My landlord works for Raytheon and hates them. I have friends at LM, NG, and a few smaller contractors. They all hate the defense agencies and everything about them. Be careful that you REALLY know how they operate, and how you will be able to tolerate it for the long term.

Could be a cushy job with good pay and a logical career progression though!

Still not sure if I want to spend the next 30+ years grinding away in corporate finance and the WSO dream chase or look to have enough passive income to live simply and work minimally.

Jul 2, 2010

Missing, just curious, but why do they all hate those comapanies / the govt so much?

Jul 2, 2010

Apparently, everything is redundant to the point of frustration (more than one person does the same job or thing, often differently and time is wasted picking one option) there is a ton of bureaucracy and I hear stories about people just being paid to sit there all day and burn through budget, etc. It sounds awful and most people I know in the industry (many, because I am in the DC area too) are really frustrated with the work system.

My new underling analyst quit a well paying govt consulting job because it takes them so much time to implement and idea or act on a piece of analysis that it is well outdated and a waste of money by the time it is implemented.

Still not sure if I want to spend the next 30+ years grinding away in corporate finance and the WSO dream chase or look to have enough passive income to live simply and work minimally.

Jul 2, 2010

I am an incoming A&D banking analyst at a large boutique (think William Blair, HL, Harris Williams, etc.) that also interned in the sector. Most of our work revolves around selling $200M - $1B companies to large aerospace companies / defense contractors and financial sponsors. My path, as well as most of the other analysts' paths, seemed to be pretty typical of other investment banking analysts (finance oriented education). When you apply to internships just make sure to indicate your interest in the A&D group (although not all banks have one).

Jul 2, 2010

Ok cool. Thanks for the input.

Jul 2, 2010

Haven't looked at it, but could it be that their D&A is hidden within another line item? Doubt they don't have any.

Jul 2, 2010

D&A is tacked on with COGS through most industries

Jul 2, 2010

D&A will almost always be lumped in partially with SG&A and/or COGS depending on the source (for example, depreciation of a company jet to fly management around will be lumped in with SG&A, while depreciation of a factory used to create the company's products will be lumped in with COGS). That having been said, ALL companies will include the full D&A expense amount in the cash flow from operations section of the Cash Flow Statement. This is the number that you want to use 100% of the time, even if D&A is broken out in the income statement, as that may not be the full amount of some of it is also lumped in with COGS or SG&A.

    • 1
Jul 2, 2010

Thanks for the help so far. So how do I model a situation where D&A is lumped in with COGS? Obviously I link the depreciation schedule to cash flow and the balance sheet, but for income statement, do I try to modify my COGS projection or do I just not show EBITDA?

For example, if Revenue is 200, COGS is 100, SG&A is 50, and D&A is 10
Do I do this...
Revenue 200
- COGS 100
- SG&A 50
=EBIT 50
Or do I do this...
Revenue 200
- COGS 90
- SG&A 50
= EBITDA 60
- D&A 10
= EBIT 50

Note that I'm talking about projected periods, not changing historicals to fit my desired format. Thanks in advance.

Jul 2, 2010

Imo the more you can break it down, the better because it gives you slightly more accuracy rather than just lumping it together.

I would also change the historical numbers just to give you an idea of a ballpark expected range.

Jul 2, 2010

Canaccord adams

Jul 2, 2010

Specifically,Jeffries Quarterdeck. Used to be a A&D focused boutique until Jeffries bought it out. Had some of the senior team members leave, but they recently picked up some of Bear's A&D guys that did some fairly large deals a few years ago, so they are poised for some decent action.

Jul 2, 2010

Quick search for "Aerospace" on WSO led me to this thread:

http://www.wallstreetoasis.com/forums/best-banks-f...

Jul 2, 2010

Boeing's market outlook reports. I currently have the 2008 edition--very informative.

Jul 2, 2010

Sorry to dig up old post.

Aviation Week(paid, but pretty critical)
Aerospace Manufacturing and Design
Space News(paid, but free online I think)
NASA Tech Briefs
MilSat Magazine(online)

Jul 2, 2010

"...all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."

  • Schopenhauer
Jul 2, 2010

thanks, very helpful!

Jul 2, 2010

interested

Jul 2, 2010
    • 1
Jul 2, 2010

Defense News, Military & Aerospace Electronics, Defense Systems. Three major web publications that also send out emails on a weekly basis.

    • 1
Jul 2, 2010

How is Moscow?

"Better to remain silent and be thought a fool than to speak out and remove all doubt." --Abraham Lincoln

Jul 2, 2010

Oppressive

Jul 2, 2010

You are in Moscow?

Jul 2, 2010

No, I am in Connecticut and have never given Moscow any thought. Assumed OKComputer was making a Snowden reference and was playing along.

Jul 2, 2010
infinitelimitation:

No, I am in Connecticut and have never given Moscow any thought. Assumed OKComputer was making a Snowden reference and was playing along.

Oh, I didn't catch that. My bad

Jul 2, 2010

We usually model straight line depreciation.

Regarding technology for aerospace, usually you'll see relatively low amortization year to year because useful lives are so long - planes fly 20+ years in some cases before being replaced for new technology, so that IP contributes for a long time.

Jul 2, 2010
j-rad:

We usually model straight line depreciation.

Regarding technology for aerospace, usually you'll see relatively low amortization year to year because useful lives are so long - planes fly 20+ years in some cases before being replaced for new technology, so that IP contributes for a long time.

Yup. 5-7 year for almost all fixed assets and then what he said above about IP.

Jul 2, 2010

bump

Jul 2, 2010

I have no idea but take a look at this - JPM Aerospace and Defense
Business Jet Monthly - http://www.nbaa.org/news/2014/Bizjet_monthly_April...

Jul 2, 2010

bump

Jul 2, 2010

Contractor side or government side?

Jul 2, 2010

Contractor side. This company specializes in jet propulsion and missiles.

Jul 2, 2010

bump

Jul 2, 2010
Comment
Jul 2, 2010