Restructuring: The Hottest Group In A Cooling Economy
“Do you ever have one of those days? When you feel like you might just default at any second?”
-That Time I Hired The Restructuring Consultant to Restructure Me, Long or Short Capital
Whenever the economy starts sinking faster than the Titanic, you start to hear about Restructuring and Distressed M&A all the time.
Sure, everyone else is getting fired – but if you go work in one of those groups, you’re guaranteed a higher bonus even as the broader market sinks, right?
Maybe, maybe not – so let’s take a look at what you actually do in a Restructuring group, how you break in, and what you do next.
A Day in the Life
So what do Restructuring bankers actually do, and how does it differ from other what other investment bankers do?
The main 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.
Hot or Not?
The “hotness” of Restructuring and Distressed M&A depends on what the economy is doing at the moment: if we’re in a recovery phase, everyone wants to work in M&A or Leveraged Finance.
But if things are heading into a bottomless abyss or if we’re in a consumer-driven recession, you suddenly start getting beer goggles for Restructuring groups.
You take a lot of risk by joining a specialized group like this because the economy and bankruptcies can turn around very quickly – you could say the “Beta” of being in a Restructuring group is higher than other areas.
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.
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.
Most Restructuring bankers believe 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”; 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 – years rather than months – 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 Equity 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.
If bankruptcies are springing forth left and right, you’ll be worked like a dog in a Restructuring group – so don’t think it’s any easier than M&A.
The Top (Only?) Groups
Put aside that boutique vs. bulge bracket debate because bulge brackets 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 Evercore, Rothschild, Greenhill, Miller Buckfire, Moelis & Co., Perella Weinberg and Jefferies.
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)
The total number of Restructuring bankers is still small compared to the sheer volume of M&A and Capital Markets bankers.
So it’s 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’re coming from a legal background, you have a big advantage in aiming for Restructuring.
Exit Opportunities
The skill set you gain in Restructuring is more specialized than what you’d get from 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 opportunity 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 unique opportunities.
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Great info, thanks. Could you talk a bit about what the impact of an economic recovery would be on restructuring groups? i.e. are they likely to be laying people off in a few years?
While an economic recovery would slow their hiring needs, they are less likely to lay people off in coming years because:
1) Much fewer hires in the first place – probably less than 500 restructuring bankers total in the US.
2) No one wants to be caught unprepared if another downturn or recession comes along and they don’t have the appropriate headcount.
A restructuring group would be more likely to shift people to other areas (e.g. M&A) if the economy improved rather than lay them off.
What are the opportunities, if any, that are available abroad to break into work in IB as an analyst coming out of Uni or for summer positions (in Hong Kong, Singapore, or London)?
Also, I have to echo some of the comments I have read about how informative and interesting your site has been to read.
That’s a really broad question, but basically all major banks have branches in the locations you mentioned and you should be able to work at them assuming you have the appropriate language skills (obviously for Hong Kong more so than Singapore/London).
The job is about the same regardless of where you go, but some of those places are doing much better than the US right now so you might find better work there.
If you want to go that route, you do have to apply separately and indicate a strong preference for those locations – otherwise they will just lump you in with everyone else in the US.
Thanks for sharing this information.
I understand that PwC or any other similar consulting firms provide financial restructuring or business recovery services to companies. Are their roles similar to the restructuring bankers mentioned here?
They do more with due diligence for restructuring deals rather than valuation / advisory work, but it is related.
Not entirely true. I work at PwC in Ireland and we specifically provide valuation and advisory (e.g. debt restructure advice, negotiations with banks etc) work for debt advisory projects. There is a separate Transaction Services group that’s involved in IBRs (independent business review).
Maybe in the US there are restrictions on Big 4 firms on the types of services that could be provided.
What do you think of i-banking opportunities in Canada now that the market is getting destroyed in the U.S.? Are any of them worthwhile? How about restructuring/M&A advisory opps in Canada with big names such as Rothschild or Lazard? Worth moving to frigid Toronto or Montreal to jump on these?
A post or an email to answer these questions would be great, as I’m considering the move.
Thanks!
Canada is probably better, but it has still been affected by the downturn. Rothschild and Lazard are probably 2 of your better options because they are small and have good restructuring groups… both also hired even in the midst of the last recession.
Any issue with moving back to the U.S. later if you end up in a Canadian office (of an int’l firm) or is the experience still respectable enough that this is irrelevant in this type of environment, i.e. is the NY, London, or nothing rule something that should be set aside in a crisis like this?
In the current environment, “Take What You Can Get” is the preferred rule. It’s harder to move back to HQ later if you start off in Canada first, but it can be done.
Just about to start at a top law firm but ultimatly I want to get into banking (long story). I want to run my plan past you. I just read you article about braking into banking from law. My law firm are giving me an option to get into restructuring. And with restructuring having such a heavy legal side to it and with the economic downturn at the moment would it not be agreat idea for me to do a few years in restrcturing and then hopefully hop across to banking???
Yes, restructuring is a good idea if you want to eventually switch into banking.
For a lawyer, you have terrible English.
Sticking with questions associated with the law, I am also a law student with considerable bankruptcy and reorganizations experience and excellent performance in my commercial finance/banking courses. Would someone with my skill set and experience have a “good” shot at getting a job in a boutique i-bank doing restructuring work – or at least as good of a shot as someone coming out of b-school?
Yes
After reading this post and a bit of googling, I decided to apply for a restructuring internship.
At interview however, I kept mentioning how big risk was now, and so I’ve been given a “Global Restructuring – Group Risk” internship.
I’m grateful of the placement but I’m slightly confused. Does this mean I’m back office risk, but just that it’s within restructuring???
Have I limited myself by talking about risk too much, as I’m starting to regret the interview now.
thanks
Hmm, it sounds more like a back/middle-office type role. You could just ask them what you’ll be expected to do. Generally they are separate from actual front-office Restructuring groups.
I would just be upfront and ask them… just an internship, so it’s not the end of the world.
I find it interesting that bulge brackets don’t have any restructuring groups. Why is that?
Does this look like something which might change in the future?
I think its starting to change a bit, but they don’t really do Restructuring deals because they don’t like to be associated with troubled / bankrupt companies and because they often have conflicts of interest… some BBs do have Restructuring groups, but they are not as active as ones at MMs/boutiques.
I’ve recently completed an internship within restructuring.
Long story short, I enjoyed it but my heart is still set on trading.
I like the bank, and so want to apply for a grad role with them.
Do you think my chances would be high or low if I applied for trading instead (with the same bank)?
It’s usually hard to switch from one area to another at a bank, but it’s not impossible… it depends 100% on how many people you know in trading there.
I am looking to get into restructuring/turnaround firms. My background is in banking with 10 years in structured finance and more specifically in negotiating/managing asset backed commercial paper transactions. In addition I have 8 years in commercial banking working with middle market companies. I am willing to work in restructuring roles starting at the bottom. Any suggestions or training classes that I could look into to see if this is something that is possible?
It’s really tough if you already have that much experience – I would start by cold-calling restructuring boutiques and tapping your professional network to see what the response is. At your level networking far outweighs training.
hey,
great article. love your work here. keep it up man.
anyway I start work in a DCM group in six weeks. any tips on how i might prepare? (excel, powerpoint, modeling, following bond markets etc.)
Not really aside from the normal stuff you mentioned above. Actually one thing I would do if I were you: try to find out something about your group, do some due diligence of your own, figure out who’s who and what they can do for you… who’s good to work with, etc. because that information is huge and way more valuable than technical skills.
How do restructuring bankers pull in fees if they’re dealing with companies about to go broke? Where/how are they generating revenue? Seems like it would a low margin type of business….
They usually have a retainer and then a monthly fee to continue working with the company. It can actually be very lucrative because they get paid even if they’re not successful, unlike normal bankers.
How is restructuring in a “good” market? I heard from friends that a lot of their class is sitting around and that bankruptcies/restructurings are down across the board.
Written in 2008 things have changed since then.
Hey Brian,
What are your thoughts on doing restructuring at a bulge bracket?
Traditionally they haven’t focused on restructuring so it might be a bit hit or miss.
Any updated views on restructuring (2010)? Are these groups still active?
Activity is down quite a lot, happens whenever the economy improves. Restructuring never stops completely but it’s definitely not as hot as it was in 2008 or 2009.
Hey-
Great note on restructuring and its general differences from traditional investment banking. I was wondering if you had any insight on breaking into the industry post MBA without having done investment banking? I’m coming from a general mgmt consulting (MBB) background, and would love to get into restructuring. Do you think a Masters in Acct and then taking the CPA would help, perhaps by going first to an AlixPartners before a MB or Houlihan?
See this interview / case study for more on that topic:
http://www.mergersandinquisitions.com/break-into-investment-banking-part-time-non-target-mba/
CPA / Masters add minimal value post-MBA… it’s all about work experience.
Hi Brian,
Would you still recommend restructuring as a good field to get into right now?
In terms of exit opps, how is HLHZ restructuring? Is it possible to get into Bridgewater, KKR or Ares afterwards?
KKR is in a totally different league from Bridgewater and Ares; the latter 2 are much more likely than KKR coming from HLHZ. Restructuring is still good (late 2010) but was probably better when the financial crisis first started. Of course if we’re in a recession for many years to come it will continue to be good.
hey thanks for all of the advice and insight
what are summer internship interviews like with restructuring boutiques like MB or HLHZ?
any specific technicals i should be focusing on?
thanks again
No not really they will just test your basic knowledge of distressed/restructured but nothing too crazy… similar technicals to other groups
great thanks again
Could you speak further to the differences between a HLHZ and MB as far as exit opps and brand name?
Not 100% certain but I believe HLHZ is better-regarded most of the time.
What type of modeling/valuation experience do restructuring analysts get? Are they doing similar models to M&A bankers (i.e. DCF, LBO, precedent transactions)?
Also, how do you think the restructuring groups of boutiques such as Greenhill, Perella, and Evercore compare to those at Lazard and Blackstone? More specifically, is it possible for analysts to get interviews at top PE shops and hedge funds?
It’s similar to what you do in banking but with a few tweaks; the main difference is you look at different capital structures in a lot more detail and need to know more about debt, similar to LevFin.
Restructuring groups at other places are good but the exit opps are probably lesser than those at Lazard/BX.
Doing an internship for RBS this summer – “Global Restructuring Group” in London. It’s basically restructuring for their own clients. Both small and large clients with syndicate loans (e.g. Dubai World). It is not advisory, more debt recovery. Alot of client contact involved.
Possible to break into the more prestigious restructuring firms?
If it’s just an internship yes you could because any type of IB internship will boost your chances of getting interviews elsewhere a lot
How do restructuring bankers make money exactly? I understand there’s a fee based structures when dealing with the debtors but since the debtors are already in a difficult financial position bc of difficulty servicing debt payments etc causing potential for bankruptcy, how do restructuring bankers get paid?
They still get paid by the debtors but sometimes there is more of a “success fee” than with normal M&A deals where they only earn it if they successfully prevent bankruptcy. And sometimes the fee is on more of a monthly retainer basis to make it easier rather than all upfront.
Hey,
I got a long term internship offer, RBS Global Restructuring group, and an other HSBC DCM offer, which one do you think I can market better for a full time IB job?
Thanks
Probably the DCM offer unless you want to stay in restructuring
Would it be a smart idea to send a stock pitch or a valuation of a distressed company to a distressed investing firm? I am sending them a cold email for a position advertised on their website.
Yes, as long as you are confident that you know what you are doing
I completely agree with every word written in the article. I have recently entered the restructuring arena at an IB boutique in Mumbai. But I’m not sure of the exit opportunities like the Distressed Asset Funds (Hedge Funds/ PE) available in India. Usually, people from this sort of role (restructuring advisory) end up continuing in the same field or join corporate finance depts of companies. Banks in India seldom have separate Restructuring divisions of their own & hence its difficult to enter the Banks as well in the restructuring profile.
Do you see restructuring picking up by the time 2012 Analysts start. Accepted an offer at a top restructuring boutique (Rothschild, Miller Buckfire, Perella) but am very concerned about having a lack of deal flow and no exit ops due to lack of deal experience.
I wouldn’t be too concerned about it. Given the state of the markets now, there aren’t many deals across the board (i.e. capital markets pipeline dry etc). Unless you have other better options on the table (meaning you have received other offers), I’d not worry too much about it.
arent restructuring/insolvency firms like more of accountancy advisory firms? the pay is very low and the description of the job can be anything from valuations to stock taking. is business recovery like corporate restructuring?