Hi guys,
I was looking to get some advice on Rothschild Restructuring for an upcoming interview (NYC). I've searched through the database and didn't really find much on restructuring interview questions. Is Rothschild notorious for being heavy on technicals? What would be the best way to prepare for a restructuring interview?
I've already read the Houlihan Lokey case study and have thought of some recent deal experience I can talk about (coming from a debt focused background). Would I be expected to walk through the Chapter 7 and chapter 11 processes and weighing pros/cons, etc.?
Also, any insight as to exit opps from the restructuring team would be helpful too.
Thanks!
Is this for SA? FT Analyst?
I can't speak from personal experience regarding Rothschild technical questions but can provide you on some insight from my FT recruiting with top RX groups.
Having a strong conceptual grasp of the Houli case study will put you in a very good position.
Don't worry about knowing the nitty-gritty specifics of BK code and how that may affect the RX process. Even if general strategy comes up, no one is going to expect you to know sections of BK code that may justify debtor-side defensive alternatives, etc.
Instead, focus on the fundamentals. Be ready to list some warning signs of a company in distress. This includes describing high-level circumstances of what could be causing problems and being able to list line items on each of the financial statements (e.g. bloated/overstated inventory on the B/S, too much/too little CapEx on CFS, etc.) Also be comfortable in explaining a liquidation valuation, and why it's not just BV of Assets minus Liabilities. All of the stuff I have already mentioned is presented very nicely in the Houli case study.
What isn't in the case study that I have also found common in interviews is heavy discussions of WACC and debt. The latter is obviously a given. I'm sure with your debt background, you'll be more than comfortable walking through various debt structures available to a company, all of the pro's and con's of said alternatives (covenants, etc.), and the concept of yield. For WACC, make sure you know the graph and can explain everything inside and out. I remember in one of my final rounds a VP made me draw the three lines on my resume. More importantly, start thinking about how WACC is affected by companies in distress and what that may mean for you as an analyst. For instance, a comp's cost of debt might grow really high in times of distress. Obviously this causes WACC to rise and the value of the company to further decrease. Are there other factors (maybe the whole industry is doing terrible) that may compel you to "normalize" the discount rate?
Almost forgot--and this is important--make sure you have some good reasons for why you want to do RX. Obviously it was a super sexy sector to get into a few years ago, but many folks feel differently about it now--especially at the new analyst level.
GreekRX, thanks for your reply. Really helpful. Would +SB but unfortunately don't have any. This is for lateral hire.
I'll definitely make sure to look over the case one more time before then. The WACC explanation is very helpful and yea, I would be able to discuss various capital structures and what suits certain companies based on my current background.
Would you say that your interviews were primarily focused on restructuring technicals or where there usual accounting/valuation questions as well?
I would say the majority of technicals will still be on on the standard topics of accounting, valuation, enterprise/equity value, etc. From personal experience, I found that there was a lot of focus on accounting in particular--due to the slew of technicalities in RX, it is extremely important you really know the statements and how everything flows through. It also may have been due to interviewers seeing I had taken extensive coursework in accounting. To generalize a bit, I think most of the RX specific questions I got were from more senior people I interviewed with. Furthermore, most times RX stuff came up, it usually resulted in the technical portion of the interview turning into a general discussion on a particular topic, i.e. we'd talk for 10 minutes about WACC and reasons we might adjust the rate. This contrasts with a typical lazy 1st round interview where some junior interviewer might go down a "checklist" of independent technical questions like "What are the 3 ways to value a comp?" followed by "Walk me through a DCF?" and "How do I get to unlevered FCF?" Hopefully that makes some sense.
As a reminder, I am speaking from only my experience with RX interviews and can't say it will be the same for you.
In regards to the WACC and debt discussions, do you have any good materials to brush up on that stuff? I'm talking advanced materials, not "how to calculate CAPM" kind of stuff.
Just to give an update, the technicals were straight forward for the most part. Typical depreciation affecting the financial statements, walk through DCF, valuation multiples, etc. One of the interviewers however had a theoretical valuation exercise based on one of the deals i had worked on. Mainly focused on how the company would be valued in a distressed situation on the debtor side, how to choose comps/normalize projections, and how to look at the company's enterprise value. I actually answered based off what I had read from the Houlihan case and the interviewer said that the method i explained was incorrect, which threw me off a bit. Everything else went well besides that last part and as a result, wasn't invited to continue on.
Thanks again for the help and I hope this serves well for anyone else who is interviewing with a restructuring team.
Care to elaborate on his "correct" way to look at normalised comps and valuation?
Helpful post thanks guys. I have a phone screen coming up for this same spot (lateral to RX). Thinkbank, where did you go wrong exactly? Still have to read over the case study but I'm waiting to see if I get asked for an interview after the phone screen.
I will owe you lunch if I get the spot... long shot.
Sure, you wouldn't necessarily pick multiples from the lower end of the range and you would exclude other distressed companies from the comp set. You would want to value the company based on its normalized value, free of any of its current distress.
While this does seem obvious in hindsight, shouldn't the appropriate valuation be on the lower end to factor in current financial problems? The normalized comps would be better suited to extract more value in a sale of the company.
P. 24 of the case reads
The key is to select appropriate multiples and representative indications of financial performance. In the selection of appropriate market multiples one must evaluate the multiples of comparable public companies and M&A transactions taking into consideration the specific risk characteristics of the subject company. Risk factors are, of course, greater with companies undergoing
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Ill add since I had a Rothschild interview recently. Technicals weren't hard I just shit myself because Im out off practice and freaked out/blanked. Guy I interviewed with was super cool though and realized I was tripping balls.
I will say, its easier to hold your own and talk your way through the thought process of the things already mentioned and when there is any "gray area" they generally wanna hear the Why not just the correct answer. What really throws you off balance are the lay-ups and slow pitches sometimes. Different interview and different RX firm but I had a guy ask if an increasing payable is a source or use of cash on a cash flow. It actually took me a second because all I was thinking about going in was cap structures, covenants, etc
hi, having an interview coming up, how do you normalize financial statements in general? I don't really see it in the case...
Pg. 25 of the Case Study has a subsection titled "Recast Financials" that explains how you would go about normalizing the financial statements.
To briefly Summarize:
COGS: will likely be abnormally high due to inability to take advantage of vendor discounts, hurrying projects, or increased reliance on local vendors as opposed to larger, international ones.
Nonrecurring Professional Fees: for Restructuring Bankers (maybe Rothschild), Lawyers, Accountants, Consultants, etc.
Other Nonrecurring Costs: e.g. abnormal increase in marketing to promote quick sales.
Above-Market Lease Expense: Lessors might demand their lessees pay above market rate if they are in financial distress. These leases can often be renegotiated after reorganization or the sale of the company.
Excess Salary Over Market: may have to pay employees more to convince them to stay on during distress instead of jumping ship.
Rothschild NYC Restructuring SA 2015 (Originally Posted: 12/30/2014)
Does anyone have any insight into Rothschilds SA recruiting process? I heard they take very few interns and was wondering if anyone had number. Do they recruit separately for M&A and Restructuring?
It's pretty clear that their restructuring is up there with Lazard and Blackstone interms of their Debt Restructuring advisory. Was looking at the restructuring league tables and they are ranked consistently 3 or 4. I heard one of their heads of restructuring is a founding member of the BX restructuring group. Anyone have any insight into exit opps also? I know this last question is premature.
SA is generalist so you might get placed on just M&A deals, just Rx or a mix of both. Interview is highly technical and Rx questions aren't off the table. This summer's class was ~15 or so
Thanks! Do you know what their offer rate is like?
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