Transportation & Infra IBD

Take my response for what it's worth; I am not in a transportation or infrastructure IBD, but I am a generalist who has worked on a few trucking and manufacturing deals, and I've looked at railroad/trucking equities.

1) Learn what drives industrials. Review (and follow) key statistics, such as construction spending, manufacturing indices, currency rates, etc. I can tell you right now off the top of my head that construction spending is at 8-year highs and within each group (think manufacturing, highway and street, power, etc.), most are up year over year, a strong dollar is leading to fewer exports (and directly impacting manufacturing activity), and manufacturing is contracting. All of this information is available from the Bureau of Economic Analysis, Institute for Supply Management, US Census, etc... Having a grasp on the data will bode well for you. 2) I think this will always vary case by case. We had a potential buyer looking at a trucking company we were representing and rather than going off EBITDA multiples, they wanted to view it on a net-asset basis. In general, I would say EBITDA multiples are probably most important, but I wouldn't shy away from looking at asset values relative to their fair values. In trucking especially, you will see a lot of these companies recognize gains on their asset sales. 3) Somewhat in relation to #1, you want to know more than transactions, and some industries have very detailed data that is only available via paid subscription. Get to know the industry's main associations. For example, the American Association of Railroads will give rail volume data. The Railway Supply Institute, which supplies national railcar inventory statistics, will charge you a fee that you won't want to pay as an individual. 4) Transportation usually goes with the general economy, but you'll see some pieces affected by certain sectors. For example, we'll see freight increase when consumer spending increases. However, we'll see less tanker freight when oil & gas is hurting. Both of those are occurring now. General freight, at least among railroads, is a bit down currently, I believe.

Bump, interested too

Everything below is for infra

1) 90%+ of the learning is done on the job. There is zero chance in hell anyone expects you to understand everything under "infra". Even IB teams I've worked with don't understand everything, just because the legalese under assets (esp regulatory assets) is so complex and changes more often than we'd like. Also, an airport is different from P&U which is different from a toll road, which is different from storage terminals. Although this is a huge pain as you go from deal to deal, I love the fact that everything is different and it feels like a completely new deal everytime you start one.

2) Standard stuff mostly. Start with comps to get some sort of an idea where you should be, move on to DCF/LBO or whatever for something more detailed

3) Read up on recent transactions. Look in to the different types of assets that fall under the infra umbrella, then determine what the drivers are (most of the ones I've dealt with are either regulatory or GDP linked). I wouldn't bother paying for special info as its probably not worth it for you. Most of the drivers in the industry are fairly obvious, the tricky part is incorporating them in to the model in a logical/accurate way

4) China slowdown and commodity collapse is fucking everything up especially in Emerging markets (Brazil has its own shit load of problems). Returns are being compressed due to increased competition since bonds are returning nothing and infra used to get you 25%+ for a marginal increase in risk. Now you'd be hard pressed to find double digit returns in developed markets. US infra needs a lot of work so the potential for govnt to do more 3Ps is interesting. China's new Silk Road is also interesting but that's still in very early developmental stages if I remember correctly.

Many thanks for all your replies.

And what do you think about moving from a Transpo/Infra team at an IB to a fund? (I'm not speaking only abound infra funds but also standard PEs targeting other industries as well)

Thanks in advance!

Honestly, I would suggest focusing first on the task at hand. Placement from Transport / Infra teams to standard PE's happens. Obviously you will get more attention if you go for infra funds but I know that you will still get good responses from the whole spectrum of corporate PE's. At the end of the day an infra lbo model is pretty similar to another industry's LBO model (if not larger, more complex, and more detailed) and that's the key skill they're looking for.

Does anyone know of any good industry-specific groups or i-banks covering transpo or infra?