Lateral from BB M&A to MM A&D - Tips for Interviewing for A&D?
I have an upcoming interview for an A&D ANL coming from a M&A product group. I am looking for anyone in the space that would be kind enough to provide an outline on areas to focus on as I review / prepare.
Some questions I have is what kind of modeling to expect (building a contract waterfall for revenue model similar to how you would a commercial business)? Can expect these businesses to be capex heavy depending on the sub vertical? What trends are critical to be following at this given time. Geo-political activity suggests there to be a catalyst in this space despite deal volume remaining relatively flat the past two quarters (80 deals for Q1 '24)? Why is this a great area to grow a career? What are the key metrics to observe? Is there anything disruptive happening now? Do we see a lot of cross convergence of industries that add to the learning curve (Tech, Energy, etc...)? I am sure that I am missing some key points here but that is after all why I am putting this out there.
Anyone that has any direction to give is greatly appreciated!
Based on the WSO content related to the Aerospace & Defense (A&D) Industry Group, here are some key areas and tips you should focus on while preparing for your interview:
Modeling Expectations: In A&D, financial modeling often involves complex contract structures, including waterfall models for revenue based on milestone completions and deliveries. Familiarize yourself with the basics of these models and consider how they differ from standard commercial business models.
Capital Expenditure (CapEx): A&D companies can indeed be CapEx heavy, particularly in sub-verticals like manufacturing or where there is significant investment in technology and equipment. Review financial statements of key players in the industry to understand the scale and impact of CapEx.
Industry Trends: Keep abreast of current trends, including geopolitical factors that could influence the industry. The stability or volatility in regions where A&D companies operate can significantly impact their business. Understanding recent deal volumes and the reasons for fluctuations is crucial. For instance, despite flat deal volume, geopolitical tensions might be driving strategic investments or innovations in the sector.
Career Growth: A&D is considered a robust area for career growth due to its critical role in national security, the constant need for technological advancements, and the global scale of operations. Highlight your interest in these aspects during your interview.
Key Metrics: Focus on metrics like order backlog, contract size and duration, profit margins specific to defense contracts, and research and development (R&D) spending. These metrics can provide insights into a company's future revenue streams and financial health.
Disruptions and Innovations: Look into any recent disruptions or technological innovations within the industry, such as advancements in drone technology, artificial intelligence in defense, or space exploration initiatives.
Cross-Industry Convergence: The A&D industry often intersects with other industries like technology and energy. Understanding how these convergences create new opportunities or complexities can be a valuable discussion point in your interview.
Preparation Resources: Utilize WSO’s interview preparation materials specifically tailored for A&D roles. This includes understanding the technical questions that may arise and reviewing any case studies or industry reports available.
By focusing on these areas, you'll be well-prepared to discuss how your background in M&A can be a valuable asset in the A&D sector, and how you can navigate the specifics of this industry.
Sources: IBD Interview Question: How to prepare for market trend question?, Aerospace & Defense (A&D) Industry Group, Interview Prep: Is this how a DTL works?, Pre-Interview Dinner - Questions, 3 Tips & What to Expect, Dress Code for a Phone Interview?
Why would you make this lateral move down?
I am not OP so take this with a grain of Salt, but IMO the MM A&D space is actually quite strong.
Assuming this is probably a Harris Williams, or Blair type situation, where you will be working on solid transactions, most likely have a higher comp* through your VP years, and probably have fewer directors to answer to (leading to potentially less office politics) this seems like it could be a good move if it all works out.
On the other side of the coin, a BB M&A group can be a good spot to be, but in the early years you are often looked at as a cog in a machine (I would say more so then at a MM bank) and can often be a little removed from the work you do, based on how the bank is setup.
* Assume higher cash comp, based on bank equity individual comp could be better
I will say that this move would be an upgrade to my career even though I did not disclose the circumstances. I am however looking for resources to prepare if anyone has any direction!
Sorry have never actually have worked/interviewed in the A&D space, so take it with a grain of salt.
For most analysis, I would say it is often less Geo-Political risk and more Government spending driven. I know if war is going on then yes things will be going well, but think of it more as if the government is going to have to revitalize outdate equipment that can be a huge driver in the space. ex. Think about missiles, sure there are certain parts of the globe that are using them activity, but think about how much the US spends to just maintain their stockpile.
I would look at some of the larger funds that have popped up recently for commentary on the space (One good example s Arlington Capital Partners). Sorry I can't be to much help here.
Bump
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