A Guide on Industrials Investment Banking

Asher Tame
Asher Tame Finance Business
5 Min Read

In investment banking teams are usually organized into industry groups and product groups . Industry groups focus on executing different deal types within a specific industry . For example an industrials industry group would handle deals related to machinery, transportation and commercial services . In this article we will delve into the details of industrials investment banking . 

Industrials as an Industry Group

Industrials is a broad industry group that includes various verticals . Although these verticals may seem unrelated at first look they have common traits: Companies manufacture machinery, large physical products or provide related services . Customers are typically corporations or governments rather than consumers . The sector is highly sensitive to overall economic conditions and macro factors such as credit availability and corporate profitability .

2a guide on industrials investment banking

Within the industrials group there are several divisions:

Capital Goods: This division encompasses aerospace and defense, building products, construction and engineering, electrical equipment, industrial conglomerates, machinery and trading companies .

Transportation: Includes air freight and logistics, airlines, marine, road and rail and transportation infrastructure .

Commercial and Professional Services: Covers a wide range of services provided to businesses .

While different banks may have variations in their group structures they often have divisions aligned with capital goods and transportation .

Responsibilities and Tasks of Industrials Investment Bankers

The work of an industrials investment banker involves a mix of pitching for deals, executing transactions and handling various tasks such as research and client relationship management .

During pitch book creation industrials bankers are responsible for conducting industry research, analyzing comparable companies and transactions and preparing financials for potential clients . Capital markets bankers and M&A bankers may provide market information and specific transaction details based on the type of pitch .

Accounting and valuation methodologies for industrials companies are generally applicable to a wide range of industries with adjustments to revenue and expense drivers .

When working on live deals industrials bankers contribute to company and industry background research, qualitative factors and take the lead in building financial models . Other team members may add transactional elements or focus on specific tasks like modeling divestitures or earn-outs .

Industrials investment bankers work on a significant number of M&A and debt deals due to the mature nature of many industrial companies and their stable cash flows . The sector also attracts private equity firms which leads to leveraged buyouts and other transactions .

Specific Verticals within Industrials

Capital Goods: This segment includes companies that are involved in manufacturing machinery, building products and electrical equipment . Key companies in this space are Caterpillar, Saint-Gobain and AB Volvo . Performance is tied to construction spending, corporate capital expenditures and government infrastructure spending .

Aerospace & Defense: Companies like Boeing, Airbus, Lockheed Martin and General Dynamics work  in this sector . Defense companies are often considered recession-resistant due to government spending while aerospace companies rely on air travel growth, airline profitability and the need for upgrades and replacements .

Transportation: UPS, FedEx, Deutsche Post and Union Pacific are representative companies in this segment . Transportation companies benefit from economic growth and global trade but they can be negatively impacted by lower growth expectations, falling trade volumes and higher oil prices .

Final Thoughts

In industrials investment banking teams are organized into industry and product groups to focus on specific deal types within industries or across sectors . Industrials bankers handle a mix of pitching, deal execution and various tasks such as research and client management .

The industrials sector involves diverse verticals including capital goods, aerospace & defense and transportation . Each vertical has unique characteristics and key drivers that impact performance and deal activity .

Industrials companies are often cyclical and sensitive to economic conditions . Understanding customer profiles, supply chains, upgrade cycles, distribution networks, production costs, barriers to entry and competition is critical in order to analyze these companies .

Investment banks with strong balance sheets and expertise in industrials often lead league tables with firms like BAML, JPM, C and CS being prominent players . Boutique firms and specialized groups within other firms also shine in this sector .

Overall industrials investment banking requires a deep understanding of industry dynamics, financial modeling skills and the ability to navigate complex transactions within a cyclical and economically sensitive sector .

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Asher Tame
By Asher Tame Editor-in-chief
Hi there! My name is Asher, and I'm a Finance Editor based in Canada. I'm passionate about all things finance and have spent years honing my skills in the industry. I graduated from the Master of Finance program at the University of Toronto, which provided me with a strong foundation in financial theory and practice. Since then, I've worked in a variety of finance-related roles, including as a financial analyst and a financial advisor. These experiences have given me a deep understanding of the industry and a keen eye for detail. As a Finance Editor, I'm responsible for overseeing the financial content produced by my team of writers. I work closely with them to ensure that our articles are accurate, insightful, and relevant to our readers. I'm committed to providing our readers with the information they need to make informed decisions about their finances.
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