by Brian DeChesare Comments (20)

Space & Satellite Investment Banking: The Best Way to Meet Elon Musk and Get a Free Shuttle to Jupiter?

Space Satellite Investment BankingSpace.

The final frontier.

These are the voyages of the…

OK, OK, never mind, back to your cubicle now.

You’ll never make it into outer space if you go into a standard investment banking role, but you might come close if you join the space & satellite advisory group.

Even if you don’t win free tickets for a Jupiter-bound shuttle, there are plenty of other benefits:

  • You get to see plenty of creative business plans – asteroid mining, moon landings, and whatever Elon Musk’s next idea is.
  • You’ll gain experience working on large M&A deals and financings, even if you’re at a smaller firm.
  • If you want to try something different, you could always move into related areas like telecom, aerospace, or industrials coverage.
  • And yes, maybe one day you’ll get invited to a closing dinner on Mars.

Let’s jump into orbit:

3, 2, 1, Liftoff…

Q: So were you always interested in outer space, or did someone else put you in this group?

A: Hah, a bit of both.

I’m from Canada, and I studied electrical engineering there before doing my Master’s degree in Management (Operations Research) – sort of like an MBA, but more quantitative.

I wanted to get into consulting, but my school was completely off consulting firms’ radar. I did get interviews, but none of them were through the school.

So I took an internship at a local firm in the satellite industry, and then I attended International Space University, where you learn all about the industry over the course of a few months (I did this out of personal interest).

I learned about the business side of space there, and got a lot more interested in finance – it seemed like a more exciting career than consulting.

While there are finance opportunities in Canada, the NY market is significantly bigger so I decided to move there to look for jobs (about 6 years ago).

When I first arrived, I did an unpaid internship at a small institutional brokerage firm for ~2 months.

At that stage, I just wanted some type of finance work experience on my resume so I could apply to other roles – namely, anything related to the space / satellite / telecom industries.

I learned of one boutique firm that specialized in satellite and telecom, so I called them when I was in NY, eventually saw a job posting, and then responded and went through a rigorous recruiting process.

Q: So what did this rigorous process consist of? I am assuming no moon landings were required…

A: It was a very small firm – around 6 people at the time – so I met with everyone there multiple times. They wanted to avoid hiring mistakes no matter how much time and money it cost them, so “cultural fit” was critical.

They asked the standard finance / technical questions, industry/market questions, and so on, but they also gave me 2 modeling tests and a writing test – even as an entry-level hire.

It wasn’t anything too complicated (think: “Build a simple 3-statement model for this company using these assumptions”), but my modeling skills were not spectacular at the time.

My writing, however, set me apart and that’s why I ultimately won the offer.

A lot of other applicants were Excel wizards, but they couldn’t express their thoughts coherently in written form.

The Space and Satellite Industry: All the Quadrants of the Asteroid Field

Q: Yeah, being able to write coherently gives you a big advantage over the “rocket scientists.”

So how is the industry divided? And why do some firms specialize in space / satellite?

A: The two main areas are the satellite side, which is more related to telecom, and the aerospace side, which is more related to… aerospace.

The satellite side is more about communications, networks, and content delivery to subscribers and customers; the aerospace side is more about building satellites, components for satellites, launch vehicles, and ground control systems.

Satellite Imaging, which is about taking and analyzing pictures of the Earth, is a smaller area but you could count that as a third sub-sector.

Finally, there are “space transportation companies” such as SpaceX – this is a brand new but rapidly growing area.

They make space transportation more widely available, reduce costs, and… attempt to colonize Mars.

Q: All of this sounds very capital intensive – I assume that’s what draws banks to the space?

A: Yes.

Deals tend to be relatively large (high hundreds of millions to billions of USD) because a huge amount of capital is required to finance new satellites, space shuttles, and the systems behind everything.

The Founder of my former boutique firm, for example, worked at a bulge bracket bank originally, started a group there that focused on commercial satellites and space, and brought in so much business that he went off on his own.

Q: So the bulge bracket banks tend to dominate deals in this industry?

A: I wouldn’t say that. On the financing side, yes, but the M&A advisory side is more mixed.

At most large banks, satellite coverage is a part of the telecom group; large banks are less active in the space part of the aerospace sub-sector since they spend more time on somewhat bigger deals in the commercial aviation and government contractor markets.

With satellites, MS, JPM, GS, CS, Barclays, and Raymond James all have a solid presence.

In aerospace, you’ll also see the large banks, plus middle-market firms like HLHZ, Jefferies, and Imperial Capital. Moelis also has a presence in aerospace.

And then there are all the boutique advisory firms you’d expect, ranging from the “elite” boutiques (Moelis) down to 1-2 person firms.

Q: Thanks for explaining that.

Jumping back to how the sector is divided, what are the key drivers and macro indicators?

A: Depends on the sub-sector… if you’re looking at, say, direct broad broadcast satellites and direct to home satellites (e.g., DirecTV), they’re all based on a subscription model.

They provide content, and you sign up and pay a monthly fee… and they keep increasing the price and the subscriber count to grow.

So the key metrics are the Average Revenue per User (ARPU), cost per subscriber, subscriber growth rate, and churn rate.

Fixed satellite operators provide “telecom infrastructure services” and operate satellites that other companies lease transponders from.

These transponders are then used by broadcasters, large enterprises or governments, ships at sea, or even planes that provide Wi-Fi.

Example companies include SES, Intelsat, Eutelsat, and Telesat.

It’s similar to commercial real estate since they pay for the satellite construction upfront and then lease the transponders on a yearly basis – just like how real estate developers construct buildings and then lease them out to tenants on yearly contracts.

You look at metrics like fill rates, transponder leasing rates, capital costs, life of the satellite, and underlying demand for these services in ships and planes.

One area that’s somewhat different is imaging satellites – they take photographs of the Earth and then sell their library of images, either for a one-time fee (for a “snapshot”) or on a subscription basis (for a library with ongoing updates).

The aerospace side is completely different because the business is dominated by government contracts and large-scale procurements – so it’s “lumpier” and contracts take a very, very long time to negotiate and close.

Key drivers include the government’s budget and the need to replace existing infrastructure.

Q: Great, but you’re forgetting about space transportation.

A: Yeah, parts of that are relatively new, though some elements have been around for a while.

The older part is the business of launching satellites. Generally, these companies require an upfront deposit or a series of payments to participate in their launch.

SpaceX is a relatively new entrant in this field, and they’re doing a lot to disrupt it.

Another new area is the space tourism companies, like Virgin Galactic or XCOR.

They haven’t officially started operating as of the time of this article, but when they do, they’ll be almost like cruise lines selling vacations and then planning their trip schedules based on sign-up rates.

Then there are companies that sell the use of “space facilities,” as well as firms that offer asteroid mining, which many billionaires have been getting into.

How to Value Your Own Rocket Ship

Q: So what are valuation and financial modeling like in this sector?

It sounds… different.

A: Yeah, but ironically the valuation side isn’t much different.

We tend to use revenue and EBITDA multiples, and sometimes also EBIT multiples depending on the company’s CapEx (see: more on EBIT vs. EBITDA).

Many fixed satellite operators have high EBITDA figures because CapEx is high but OpEx is low – so that can skew things if you rely solely on TEV / EBITDA multiples.

For telecom-related companies, the subscriber count, subscriber growth, and churn rate are all very important, so we might look at TEV / Subscriber-type multiples.

Lease accounting may also be important, depending on the company’s business model.

Q: What about the DCF?

A: You can run a DCF as well, but you have to be careful with CapEx and D&A assumptions since satellites can sometimes last for 15 years!

So you might build a 15-20 year DCF, and then assume that CapEx spending does NOT follow a predictable trend since satellite construction tends to be “lumpy.”

Terminal Value is tricky since satellites need to be replaced, but the exact timing is hard to predict.

So you may end up in situations where the NPV of the Terminal Value represents a somewhat lower percentage of the company’s total implied value.

Wheeling, Dealing, and Moonwalking

Q: And what are the most common deal types?

A: My firm didn’t participate in the capital markets side, but most bulge brackets do quite a few capital markets deals.

Sometimes we’d get an assignment in conjunction with one of those; other times, we did a lot of middle-market M&A work and small private placements for newer, growing companies.

Q: So what motivates M&A in the sector?

A: A few factors are unique to the space and satellite sector, while others come up across all industries:

1. Scale – Because of the expense structure, it’s almost always better to operate, say, 10 satellites rather than 1-2.

The ground infrastructure and operating expenses may be slightly more expensive with 10 satellites, but it won’t cost 10x as much to operate.

There are other benefits as well – for example, a company with more satellites will have less “lumpy” procurement costs and its CapEx will be easier to forecast, so that can make it easier to raise equity/debt financing.

As a result, a lot of smaller operators with only a few satellites join together to gain greater scale.

2. Geographic Coverage – A single satellite can cover, at most, 1/3 of the Earth at any given time.

So if a company wants to service Europe, Asia, and the Americas, it needs to operate multiple satellites.

A lot of broadcasters also like having broader coverage – for example, if they’ve signed up for a satellite transponder in one part of the world, being able to work with the same operator to contract another transponder in another part of the world is a bonus for them.

So many operators join together to enhance their regional coverage, or to expand into new regions altogether.

3. Spectrum Assets – These are always important in telecom, but they’re even more important with satellites because spectrum licenses limit companies’ rights to broadcast into certain countries and regions.

There have been multi-billion dollar battles over spectrum rights in parts of the world, so bidding on the rights themselves isn’t always the best approach.

Even if a company doesn’t have great satellite coverage, it might become an attractive acquisition target if it has desirable spectrum licenses.

How to Enter the Space Academy (and Graduate)

Q: Very interesting. Do you have any example pitch books or presentations from the sector, or other recommended resources?

A: A few good news sources are Space News, Satellite Finance, and Milbank’s monthly industry newsletter.

New Space Watch, the Satellite Industry Association, and the Space Foundation and its annual industry report can also be useful.

The consulting firms Northern Sky Research (NSR) and Euroconsult also publish useful market research.

If you want examples of documents that banks create, take a look at:

And then if you want to see a few merger announcements and company presentations, check out:

Q: Great. And what are the most common paths after joining this group?

It seems very niche, so can you actually move into other industry coverage teams?

A: It is a niche area, but there are more opportunities than you’? think.

Some people do leave and move into private equity; a lot of satellite financings involve high-yield debt, so you gain a relevant skill set if you work on those deals.

You’ll also see people move to credit funds, credit advisory funds, and Leveraged Finance for the same reason.

You could also move into related coverage groups at banks, such as telecom/media, aerospace and defense, and industrials.

And, of course, some people do stay in this industry for the long-term. It has changed quite a bit and become more dynamic because of companies like SpaceX.

Even bigger companies in the field are taking a more serious look at “creative” ideas like space tourism.

Q: And what are your own plans?

A: As I mentioned, I worked at the boutique advisory firm for a few years and recently left.

I’m looking at a few different options, from joining a newer space / satellite start-up to joining a larger bank to starting my own fund or partnering with others to start investing in the sector.

The best part of this industry, by far, is getting to see everyone’s business plans.

You see some really exciting ideas, from space stations to moon landings to asteroid mining missions – quite a bit different from your average business plan in the consumer retail group.

And that’s what keeps me interested in the sector, even after years of working in it.

Q: Awesome. Thanks for your time!

A: My pleasure.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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  1. Hi,

    Are there any updates on SpaceBanker’s current viewpoints/status in terms of his finance career within Commercial Space? I would love to pick his brain, get a better understanding of his career path, and what his current aspirations are.

    Much has happened in the industry since the last post in 2014 (e.g: SpaceX’s reusable rockets being proven, Blue Origin stepping their game with NewGlenn, Orbital ATK’s progression, etc…), I would love to see what road he is currently on.

    1. I’ll see if we can do an update at some point, but it’s really tough to get interviewees to come back after many years and respond to questions/comments.

      1. Hi – It would also be great if he/she could provide some examples of Boutique or Bulge bracket firms that specialize in this space.

  2. Many thanks for the informative article, I have a few questions regarding entry into this field (as well as similar areas such as aviation finance/industrials).

    I am an Aerospace Engineering student who is about to begin his final year at Bristol University; I have worked various internships within the Aerospace sector (Airbus, Rolls-Royce) which have covered both R&D/Engineering and Project Management roles: Experiences with these as well as a long-standing interest in the markets have drawn me to consider whether switching career to finance would be both a viable and satisfying prospect. I am especially drawn to the kind of work described here and in other articles covering industrials as the work can ultimately have an impact through the creation of tangible products.

    My first question is regarding entry paths. Would a more “general” route involve going through the industrials group of a bulge-bracket and then eventually jumping to the more boutique firms, or is it possible/more desired to transfer across from a relevant career path based in the aerospace or consultancy sectors? What I am trying to understand is whether or not it is possible to get into this kind of work following a few years in aerospace or whether I would need to make the jump into finance right now.

    As a follow-up to the first question, I would greatly appreciate advice on moving over towards Investment Banking Internships/Graduate Schemes if this is a good route to take. I am very aware I have little experience which is directly finance-related and therefore may struggle in convincing an employer of my motivation for wanting to work in finance. Bearing this in mind, is my best strategy to network with a view of securing an internship next summer or is it worthwhile targeting graduate schemes for any firms which have a strong presence in industrials (more specifically aviation, space and transport)?

    Any advice you can offer is greatly appreciated- thank you again for the interview, the content on this site is excellent at providing insights way beyond the glossy careers brochures.

    1. Avatar
      M&I - Nicole

      1) It depends. If you aren’t sure whether you want to be in aerospace or not, I’d jump into finance first and broaden your options. If you’re sure you want to work in aerospace, I may actually start off in the sector
      2) I’d say both. You can target graduate schemes and network at the same time

  3. Hey there!
    Ever since this article was published I have been thinking more and more about getting an internship in this industry coverage, but from my research I have found mostly “aerospace and defense” groups rather than “space and satellite” (HLHZ, Jefferies, Barclays, Cowen Group and many more)
    Is the “aerospace” part of the group is the equivalent of the “space” part from the article?

    1. Avatar
      M&I - Nicole

      I am not 100% sure but I’d say so

  4. Hi Brian and Nicole,

    I hope all is well.

    I was wondering if you could please give me your thoughts and reactions to something.

    Do you agree with this statement and quote: “If you work 80 hours a week to make $100,000 per year, then you are POORER than someone who works 40 hours per week and makes $60,000 per year”

    You both seem like you are doing very well in All Aspects of your life: Professionally, Personally, Socially, etc.

    Based on this question, I obviously do not work in Investment Banking, and I do not even work in a Wall Street related job.

    I graduated college just over 2 years ago, and I have worked in Outside Sales and as a Recruiter the past 2 years. I just read your website just for leisure and pleasure. You are a great writer and you guys created an Amazing Website and Business.

    I turn 24 years old in a few weeks on August 1st. I was born on August 1st, 1990.

    If you could please give your professional and personal answer and reaction to that quote, it will be very much greatly appreciated.

    Take Care,

    1. Avatar
      M&I - Nicole

      This is a very subjective quote and I don’t have a “formal” response to it. “Poor” is a subjective definition. Monetarily you’ll likely make more in IB given bonus base as well as exit opportunities and the experience which is priceless. However, you won’t have a life and if you value your time more than the above, then you may find that the 40-hour-role (assuming one with a smaller salary and no stock ownership) maybe a better option for you (make you richer in other ways.)

    2. I think you should relax and not care so much what other people think of you. You’ll be very unhappy if you go through life thinking about everything in the context of quotes like that. Choose your own path, don’t be insecure, and do something where you earn enough to be satisfied… and that you’re also good at.

      1. Thanks for the reply back.

        The context of why I asked that question in the previous post is because I was reading a dating coaches’ blog, and the point he was trying to make with that quote is that “Focusing on dating takes time and an open schedule”.

        The Dating Coach also went on to say that: “If you are working more than 40-45 hours a week. If you working more than 45 hours a week, you are going to have a tough time being able to spend the time that you need in order to meet the women that you want.”

        And the dating coach ended with “If you have a job where you are working 60 to 80 hours a week, it is not possible. You are absolutely 100 percent going to sacrifice the quality of your life moving forward.”

        The Dating Coach was bringing up the idea of Lifestyle Creation and what a person does with his/her time. And how important it is to set aside ample time for dating and socializing and making friends and meeting and dating women when a man is in his 20’s.

        I guess based on the quotes from the Dating Coach, what is your professional and personal opinion and reaction to the quotes and statements made by the dating coach.

        Any and all advising on this matter will be very much greatly appreciated.

        1. Yes, it is harder if you work that much. But it’s not impossible (how else could bankers/lawyers/corporate executives ever get married?). Just find someone else who is also busy and/or avoid people with too much free time.

          1. Hi Brian,

            Thanks for the reply back.

            Is there any advising and/or suggestions that you have where I can work long hours in my career/job and do well in my career, while at the same time having a great a social and personal life also?

            Is it possible to reach the TOP of a Business Career and work long hours (60-90 hours a week), while at the same time have a great social life (great friends and active social life and travel the world) and a great personal life (amazing girlfriend/wife, being able to spend time with girlfriend/spouse and children) also?

            It has always been my belief that to reach the top of any career path and any type of profession: it requires hard work, sacrifice, and risk.

            I turn 24 years old in a couple weeks. I was born on August 1st, 1990.

          2. Avatar
            M&I - Nicole

            If you’re working 90-hours a week it can be challenging to maintain a social life outside of work, unless all your friends are from work. If your job (i.e. those 90-hours) involve traveling around the world and socializing with people (and your wife can travel along with you), yes this is doable, but this job is unlikely to be in finance.

            Yes, it does require some work and risk to reach the top. You may find the following articles useful:

  5. Good interview. Particularly intrigued by how the interviewee’s writing skills helped him to land the offer. Are there any articles / tips / pointers regarding this? Seems like a pretty important skill to have and is commonly (and somewhat understandably) overlooked in favor of the more quantitative aspects of banking.

    1. Thanks! We don’t have anything specifically on writing skills right now, but there is an upcoming article on communication skills in IB. It is definitely a critical but often overlooked skill.

      If you take a look at some of the case studies and stock pitches on the site, those also have examples of “good” writing samples (or at least I think so…).

  6. Avatar

    BBQ Shape – Interviewee here and thanks for the very cogent question. In principle, a resources company is a resources company whether it conducts its activities in the ground, underseas or in space. There are junior mining companies (the industry term for prospecting, exploration and development companies) that are seeking to develop the ocean sea bed and other similar areas. To me, this sounds not that far away from operating in space, especially given the extreme environment and dependence on leading edge technology to gain access to the resource. The real issue is whether the company can prove recoverable assets and recover it in an economical way. The first part is doable now (through exploratory probes and ground observatories) and I don’t see any real reason that the second can’t be developed within a 10 year time frame.

    On the demand side, it will probably take that long to develop anyways. While bringing back platinum and similar metal to earth has a market now (provided the costs are right), the market providing fuel for spacecraft is a market that will need to develop. In addition to developing the infrastructure for delivering the fuel safely and efficiently, there just needs to be users and use case (both commercial and government) for the types of activities that you need the extracted fuel for. That will probably take at least 10 years to develop and expand into a workable nascent market.

    Bottom line, it’s very leading edge but nothing I don’t view as undoable and quite possibly achievable in the 10-20 year time span. If you are an investor though, be prepared for high risk, large capital requirements and long time horizons.

  7. Avatar
    BBQ Shape

    I have a question for the interviewee if he or she doesn’t mind popping in:

    This will sound crazy to others, but since you’re in the sector you might have come across this. Currently, I believe we have the technology to already land small vehicles on asteroids and influence their orbit paths. The resource content of what’s up there in near-space dwarfs everything we currently have on this planet. There’s at least two companies out there working on ways to gather resources like fuel and metals from near-Earth asteroids that pass our orbit regularly.

    What are your thoughts on this? From a finance perspective, to me it’s the same foundation as energy and natural resources just with some larger numbers when it comes to assessing the net asset value of one of those rocks, etc. They say a single rock can be worth billions from the precious metal content. The first step seems to be working out a way to create rocket fuel from these rocks to lay down the infrastructure needed.

    I don’t mean to veer way off with the question, but I can’t resist on this one because of the dollars being pumped into this and wanted to get your thoughts. Could this be done within 10-20 years? Thanks.

    1. I’ve asked the interviewee to respond, but my own thoughts based on our discussion a while back: yes, in a sense it’s like energy/natural resources with bigger numbers, but the risk factor is MUCH higher overall.

      It’s like investing in early-stage tech startups, but with risk and potential returns magnified by a huge amount… so you could strike it rich, but if your technology doesn’t work you could also be out billions of dollars with no way to recover it.

      I doubt this will be feasible within the next 10-20 years, but who knows, smarter people than me may have a better answer for this one….

    2. Avatar

      By mistake, I responded below, See the main thread for my reply.

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