1. Can you elaborate on restructuring recruiting?

Yes - it’s highly selective and typically limited to the top “banker” schools such as Wharton and Harvard, at least at Blackstone and Lazard. If you want to improve your chances, go to a less well-known restructuring group first (at one of the smaller banks I mentioned) or get some experience in a related field, like restructuring at a Big 4 firm.

2. Ok, so why is it bad to get in relationships with co-workers again? I saw this cute girl…

I feel like this site is turning into a dating column lately, but here we go…

There are 2 distinct problems:

1. You’re around the person all the time. You work together 18 hours a day, go back home and you’re together for another 6 hours. Everyone needs some personal time/space.
2. If you break up, that’s really bad news because you’re still around the person all the time at work. And take it from me, there’s no situation more awkward than sharing a lot of friends and/or co-workers with an ex.

3. What do you think of private equity or hedge fund funds of funds?

I’m not a huge fan because the work is far removed from the interesting parts of deals (i.e. the details “close to the ground”). You also don’t have a huge array of exit opportunities when you go to one of these rather than something more traditional.

But if it’s down to this or unemployment, be like relationships on Facebook and take “whatever you can get.”

4. Is there a big difference in bonuses between Fixed Income, Equity and M&A?

Yes, typically bankers in Product Groups (M&A, Leveraged Finance, Restructuring) and Industry Groups (Technology, Retail, Consumer etc.) earn the highest bonuses and other groups such as Equity Capital Markets and Debt Capital Markets work less and therefore earn less.

I don’t have exact numbers offhand but the difference can be substantial, probably at least 20-30% (anyone have data to support this?).

5. I have offers from Goldman, Morgan, Blackstone, Lazard, and Merrill. Which one is the best?

None of the above. Go to JT Marlin.

I mostly stay away from writing about specific firms because the people you work with make far more of a difference than which bank you’re at. I would try to do as much shadowing as possible, “interview” as many bankers in each group as you can and make your decision based on fit rather than prestige. Those are all really good names.

6. How do the different Product Groups and Industry Groups work together? If a company you’re selling wants to raise capital, would the M&A group or Leveraged Finance group do it?

This is highly dependent on your bank and group, but at least where I worked, different groups stayed fairly separate. In the scenario above, the Leveraged Finance guys would handle all the memo writing and debt modeling and they might just request information on the company, financials and industry from us.

Obviously there are exceptions: Goldman, for example, doesn’t have Product Groups at all and their Industry Groups do all types of deals.

7. How does restructuring differ in an “up market?” Does everyone get fired?

Work and deal flow are definitely slower, and your experience won’t be as good. Surprisingly, though, everyone does not get fired, for 2 reasons:

1. There are a very small number of Restructuring bankers anyway; firing 10 people won’t make much of a difference to your bottom-line vs. the 500 M&A bankers you have.
2. Banks don’t want to be caught flat-footed when the market comes crashing down, so they always keep Restructuring bankers on hand.

8. What do you think about regional offices vs. going to NYC?

Obviously a financial center such as New York or London offers more firms to interview at and more networking opportunities; beyond that, working at a regional office means you’ll likely go to other firms in your region rather than moving across the country. The “quality” of your exit opportunities depends more on the bank itself rather than which office you’re in.

9. I work in the front office doing equity research for a boutique, but attended a state school in the Midwest. Can I still get into top business schools?

Yes, but it will be an uphill battle because of your undergraduate school. Most of the top business schools have students who went to the Ivy League and other top universities.

I would recommend developing one of your hobbies or interests outside work and coming up with a good angle that sets you apart from all the “blue-chip” candidates.

10. I’m a rising senior and have offers to work at a well-known middle-market private equity firm as well as a regional boutique bank. What do you recommend?

I would almost certainly go with the middle-market PE firm. There’s nothing wrong with boutiques but generally when you start out, you want to work at the largest place you can, and your PE firm is much more well-known than the boutique. You’re also more likely to get more “real work” at the PE.

(This question/answer would be more meaningful if I hadn’t deleted the names, but I must do that in the interest of privacy)

11. I remember you mentioned that Transaction Advisory Services is a good way for accountants to switch into banking. However, there are a lot of TAS groups - PricewaterhouseCoopers, for example, has a whole array of groups. Which is best for getting into finance?

Corporate finance and M&A specifically would be best. The other ones listed there “help out” on transactions in the sense that they assist with due diligence and such, but they’re much less similar to what bankers do than corporate finance/M&A are.

12. Should I study for the CFA? I really want to get into investment banking!

No, the CFA is a waste of time for banking/private equity/hedge funds. I knew maybe 2-3 bankers who had it. It’s more useful for other fields in finance, such as portfolio management. Even getting a part-time or unpaid internship at a boutique would be a better use of time/resources.

13. I have an upcoming summer internship in New York, but I have no money. How can I afford an apartment?

Consider NYU student housing - most interns in NY live in housing at one of the nearby campuses. Columbia also has housing I believe. Failing that, ask your firm what interns typically do for housing and get in touch with former interns to see what they did.

14. Can you tell us more about yourself?

I’m currently re-designing Mergers & Inquisitions and will link to my MySpace profile so you can read all about me.

(Kidding, although I will be telling more of my background story on the About page when the re-design launches.)

15. With everything you have to do, you must be very busy. It must be difficult to write for your site every week, respond to emails and comments, review resumes, and work on your upcoming investment banking online training courses.

How do you have time for everything? What motivates you to write?

This one’s easy: models and bottles. Just call me AJ.

-That Time I Hired The Restructuring Consultant to Restructure Me, Long or Short Capital

You’ve probably been hearing a lot about restructuring lately. With the economy cooling down (or crashing into a bottomless abyss, as some might argue), restructuring is one area that keeps heating up.

And with the toughest hiring market since 2001-2003, who wouldn’t want to work in a counter-cyclical group?

If You Would, Would You Walk Us Through A Typical Day, For You?

So what do Restructuring bankers actually do, and how does it differ from other what other investment bankers do?

The primary difference is that Restructuring bankers work with distressed companies - businesses that are either going bankrupt, getting out of bankruptcy, or in the midst of bankruptcy.

When a company’s business suffers and it starts heading down the path of bankruptcy, its creditors - anyone that has lent it money, whether banks, hedge funds or other institutions - immediately take notice.

A Restructuring group might be hired by a company to negotiate with its creditors and get the best deal possible, usually in the form of forgiven debt. Or they might advise a company on how best to restructure its current debt obligations either to get out of bankruptcy or to avoid it in the first place.

Another big difference is that Restructuring bankers must work within a legal framework - the Bankruptcy Code - and hence must have a more in-depth legal understanding than other bankers.

Why It’s Hot

You don’t need to think too hard about why Restructuring is so hot right now: bankruptcies were already up 18% in February of 2008, and they’ve likely risen more than that by now.

Businesses that sell primarily to consumers and companies that sell high-end luxury items are especially vulnerable to the current recession.

Oh, and casino companies laden with debt via the Leveraged Buyout boom of 2004-2007? Well, with Las Vegas tourism already down over 10% this year and airline terminal construction being canceled, you might just see a few of them hiring Restructuring bankers soon.

Banks have caught on, of course, and have been expanding their Restructuring practices lately. Moelis made waves recently when he hired 2 Restructuring Managing Directors from a middle-market firm, and other banks are following suit.

Debtor vs. Creditor

Broadly speaking, there are 2 types of work that Restructuring groups do: advising a creditor (or group of creditors) and advising a debtor (the distressed company).

You can think of these separate roles as buy-side (representing the buyer) vs. sell-side (representing the company trying to sell itself) advisory in the world of M&A (I realize this is not a perfect analogy).

Regardless of which side you’re advising, much of the work is similar - valuation, modeling (analyzing different debt structures) and presentations.

It’s not too different from the work you do in other areas of banking, but it tends to be more technical and finance/modeling-intensive, especially compared to something like working on IPOs, which is mostly about revising Word documents.

This is a controversial point, but most Restructuring bankers would agree that you get a better experience as a junior banker advising the debtor rather than the creditor.

On the debtor side, you get closer to the company and gain a deep understanding of its business and finances; you’re also more likely to gain exposure to other areas of investment banking, such as capital raising and M&A, because Restructuring deals often turn into desperate efforts to sell or raise capital.

This is not to say that advising the creditor(s) is “bad”; as I mentioned, much of the work is similar and you learn a lot about both finance and law doing either one.

One advantage of advising the creditor is that you get to build relationships with hedge funds and private equity firms that invest in distressed companies - and those relationships in turn can lead to good exit opportunities in the future.

What Analysts And Associates Actually Do

Again, the actual work you do is not worlds apart from the standard banking routine: valuation, modeling and presentations. Deals tend to be more involved and can extend over longer periods (witness United Airlines, which took 3 years - longer than most M&A deals), and that equates to a bit less pitching and more deal work, which is always a good thing.

You’ll gain more exposure to debt and the legal framework than your counterparts in M&A or Capital Markets would, but you’ll learn about fewer industries and companies simply because of the nature of your work.

Hours and lifestyle?

Please, this is banking. Keep your expectations in check.

Recently, Restructuring groups have been busier than ever, with hours worse than those of M&A groups simply due to the market we’re in.

The Top (Only?) Groups

Put aside that boutique vs. bulge bracket debate because bulge brackets simply don’t do Restructuring. There are 3 firms with well-known Restructuring practices: Blackstone, Lazard and Houlihan Lokey (HLHZ).

There are many other banks that have Restructuring groups - examples include Rothschild, Greenhill, Miller Buckfire, Perella Weinberg and Jefferies (from which Moelis “poached” his 2 recent MD hires). And Evercore and Moelis & Co. are both beginning to build their Restructuring practices.

But Blackstone, Lazard and HLHZ are tops in the field.

Even on multi-billion dollar, complex deals you see Blackstone, Lazard and HLHZ dominating the market with some of the other names here present as secondary advisers.

Since Blackstone and Lazard primarily advise the debtor, they are often viewed as the “top” Restructuring practices. Houlihan, while still strong, rarely represents the debtor on the largest, most complex deals.

How To Break In (Hint: It’s Tough)

Although Restructuring groups have been hiring more and more bankers at all levels lately, the total number is still small compared to the sheer volume of M&A and Capital Markets bankers.

So it’s certainly not easy to break in.

Some banks (Blackstone, for example) recruit separately for Restructuring and keep the Analyst class size very small (under 10). Others, such as Lazard, place you into Restructuring once you’re already in their generalist pool.

It’s tough to break in because of 1) the small sizes, 2) separate recruiting and 3) increased emphasis on technical skills, which few students have unless they’ve had previous banking experience.

You might try for one of the smaller firms’ Restructuring groups, but even those tend to have more rigorous and technical interview processes in place.

As I’ve been mentioning, Restructuring bankers work within a legal framework and have to consider legal issues that other bankers never contend with - so if you have the appropriate legal experience, it can be an effective way for you to break into finance.

Exit Opportunities

The skill set you gain in Restructuring is more specialized than what you’d get out of working in M&A or Capital Markets, but it also allows you to work at hedge funds and private equity firms that invest in distressed assets (there are far more hedge funds doing this than there are PE firms doing it).

Going to such a fund or a “Special Situations” fund (just another codeword for distressed investment opportunities) is probably the most common exit for Restructuring bankers.

That said, you can also go to any normal hedge fund or private equity firm as well; even turnaround consulting is a possibility. If you’ve worked for the “top” groups (Lazard or Blackstone), you’ll have a good shot at getting into the biggest funds out there.

Restructuring: Stay Hot In A Frigid Economy

In a poor economy, Restructuring is always the hottest area. Although it’s tough to break into and the total number of bankers dedicated to this practice is small, if you play your cards right you could gain a very specialized skill set as well as access to some unique opportunities.