Turnaround & Restructuring - 2023 Perspectives

There is relatively little current information on the forum regarding Turnaround & Restructuring Consulting so curious to get current perspectives on the role.


Specifically interested in hearing current lifestyle perspectives across various firms (have travel dynamics changed post-pandemic or are most firms back to pre-pandemic M-Th travel schedules, typical hours billed per year in both busy and slower years, etc.), compensation progression (Associate, Senior Associate, Director, Senior Director, MD, etc.), compensation model (black box, utilization or billable hour based, etc.) and any other relevant views (how busy is the restructuring world currently, etc.).

 

Based on the most helpful WSO content, as an Analyst in the Restructuring and Turnaround Group at Alvarez and Marsal, you can expect a few things:

  1. Travel: You'll likely be traveling Monday to Thursday to client sites. This was the norm pre-pandemic, and while some dynamics may have changed, many firms are returning to this schedule.

  2. Work: You'll be working closely with the client's treasury group to forecast a 13-week cash flow and act as the CFO's primary point of contact for everything related to it. You'll also be involved in building a business plan, working with their business groups and FP&A to build an operational business plan that links up to a 3 statement model + liquidity forecast.

  3. Compensation: While the context doesn't provide specific figures, Alvarez and Marsal is a solid place to work, and you can expect competitive compensation for your role.

  4. Current State of Restructuring: The context doesn't provide specific details on the current state of the restructuring world. However, consulting firms are generally helpful to large companies during downturns when it comes to cost-cutting and restructuring projects. There's also opportunity for firms to help companies strategize for the post-downturn period.

Remember, this is a challenging but rewarding role that will require a lot of you. But hey, who said being a monkey was easy? Keep swinging!

Sources: Alvarez and Marsal -- Restructuring and Turnaround Consulting, Q&A: Former MBB Consultant

I'm an AI bot trained on the most helpful WSO content across 17+ years.
 

I've worked on/supported restructuring engagements throughout my time in consulting, so I can shed some color, but others can tell me where my impressions are wrong:

Lifestyle - Not the best. You're working with companies in financial distress, so processes are messy to non-existent; your client is either short-staffed or often working with people who have one foot out the door; and things are actually an emergency because the company may not be able to keep the lights on or pay its employees. On top of that, you're traveling frequently (pre-pandemic, I was traveling M-Th every week on RX assignments; nowadays it's closer to M-Th every other or once every 3 weeks) and working late when you're on-site.

Comp - Will vary firm to firm, so hard to comment. At my current firm (non-A&M/Alix/FTI), it's the typical base and bonus. The team in restructuring is in maybe a slightly higher band for both, but whether or not it's worth the lifestyle tradeoff is TBD. A&M and FTI I know for sure have incentive-based bonuses where if you're charging a lot of time, you'll make a lot.

Market - Red hot. Forget all the nonsense about a "booming economy". There was so much disastrous M&A and companies that levered up with cheap debt that need help figuring their shit out. My firm is sold out and turning down work because people are already double-booked and stretched thin.

Despite all the negatives I mentioned above, I do find the work pretty interesting. It's a good mix of strategy and doing some financial modeling. The main deliverables are a 13 week CF (I have less experience with this candidly) and a financial model (this has been moreso my role) where we create a 3 statement model of a business plan/target and create some analyses/dashboards to track how we're doing versus actuals. There's also a good amount of ad-hoc analyses to figure out why/why we're not tracking towards the plan and modeling different scenarios to negotiate with lenders. It's great experience, but not a lifestyle gig from what I gather

 

Interested in hearing your perspective on this. To my understanding, RX Consulting is not really an area that hires from undergrad. That being said, I do know that Chicago is a hub for RX in general and I recently accepted an offer under Finance & Strategy at a FAANG company in Chicago. Would it be realistic for me to pursue RX consulting after say 1-2 years of experience in this area? 

Very interested in going down this path and also pursuing an MBA

 

What I gathered from my firm's RX group (just as an FYI, my experience is in financial modeling and data analysis, so I mostly help RX teams with complex modeling vs being full-time on the team), they do prefer people with experience. I've seen a lot of ex-auditors, TAS, valuations people who transferred internally. Externally, I think anything where you can communicate that you can build complex Excel models, think strategically/operationally about a company (i.e. have domain knowledge), and understand accounting will help you out a lot

 

I'll add that if you happen to find a TMT focused group in the restructuring space, that might be a possible avenue. FTI has a group under their Corporate Finance & Restructuring umbrella that is really well known and equally as prestigious as their core Restructuring practice. That said, if you want to be in RX, be close to it. Credit analysis and lending are good areas to start. Absent that, as Lester mentions, build your Excel skills and focus on traditional 3-statement / 13 WCF modeling and add that to your resume. 

 

I would add that lifestyle is dependent on the type of work you do. Debtor-side cases tend to be more involved than UCC / senior creditor advisory cases given you're driving a lot of the background analyses that support the business on top of the counter-analyses related to the negotiations with and among creditor classes. On the creditor side, you can juggle a handful of cases at once (depending on the size of the case). Having worked on all three fronts in my career, I can say that creditor side work, while challenging, isn't so bad in terms of lifestyle. You will still see your typical 80-hour weeks, but it's not as consistent as what you'd find on the debtor side. In some instances you may find yourself understaffed and begging for more work on the creditor side which isn't typically the case on the debtor side. You also don't have to travel very much; often travel (if necessary) occurs at the beginning of the case and at key points where a face-to-face interaction is required. Post-pandemic, it's almost non-existent on the creditor side.

On the debtor side, I agree with Lester Freamon above. Though if you're young, single, and up for the travel, I'd prefer the RX consulting lifestyle over I-banking. It's much less about the silly garbage-in-garbage-out financial model and more about what's going on with the business, how you fix it, and various relationship dynamics between lenders, customers, etc. A few years ago, I was all about this life, but as a married man with real-world responsibilities now, I'd prefer to stay put somewhere behind a desk with the hope of seeing my wife for a few hours after work and being able to plan for the future.

Agree above on comp as well, but FTI's comp scheme is much less variable with the hours than A&M. FTI generally underpays relative to its direct competitors as well as many smaller, mid-market firms. The trade-off is that FTI is quick to award titles for performance and there are more formalized training opportunities for the juniors. It's very much a large company with an office culture as opposed to some other shops where culture can be non-existent (given everyone travels).

 

This was helpful for me as well, thanks! Kind of curious how the analysis differs on the Creditor vs the Debtor side. I do enjoy most of the work we do on the debtor side, but (and maybe this is a function of the PE client whose PortCos I'm serving), there's also a lot of useless ad-hoc analyses that I'm often putting together that are essentially busy work of little value. The part I enjoy more is understanding sales pipelines, which vendors we can stretch, putting commentary on why or why we aren't meeting plan, and how to structure debt with lenders. Do you still get exposure to that with UCC/Creditor work?

 
Most Helpful

In a nutshell, creditor-side work is very much "sit back and point fingers." Now, for someone with experience on the debtor side that might be looking to take a step back, this is a phenomenal role given the lack of travel and potential influence in a case (depending on where you are in the credit stack). 

In secured lender engagements, you are essentially doing the job of the distressed credit recovery management team, except you don't have to manage a portfolio of credits, just the one. You may be paired with a relationship manager and/or a credit officer that has the relationship with the distressed company. These engagements often start with typical diligence - 3 statement model review, 13 week cash flow analysis, and business plan review. Sometimes you may create a sensitivity analysis against the 3-statement model, modify the 13 WCF, and evaluate credit metrics including FCCR, DSCR, Debt / EBITDA, and EV. If it's a short engagement, the work stops after you present findings to the client (the lender). Your findings may be investigative in nature, helping the relationship manager / credit team wrap their minds around the company and specific challenges. If it's a longer term engagement, you'll tag along and assist through waiver negotiations, covenant modifications, customer agreements, sales processes, and negotiations with other constituents. All along the way, you'll be monitoring collateral levels to be sure they remain fixed to whatever your initial collateral position was at the time of the waiver / amendment signing. As the restructuring continues you'll push for monthly financials and regular updates on 13WCFs to evaluate (aka criticize) the business and find out what it's doing to turn around operations. During the sales process you'll evaluate asset values relative to plan and determine if a buyer's bid is acceptable or not. If the case turns to a bankruptcy, you'll evaluate whether or not you want to be the DIP lender based on company projections and the business plan and proceed through more nuanced negotiations around the BK process.

In UCC cases, you're primarily focused on recovery. To assess recovery, you really need to understand your place in the recovery waterfall. This involves a lot of discovery / investigation of the creditors involved in the organization and the history of payments / legal actions brought which play into how value disseminated. Your first initiative is to evaluate the creditor matrix which informs the scale of the company's liabilities. Then, assets become understood from various first day filings, pre-petition and post-petition financial reports and other data provided by the company during negotiations and in response to diligence requests. Line them up and then there you go - waterfall.... Well it's not that simple, but that's the big picture. A lot of your time will be spent working with lawyers to understand how some claims may have priority over others, and assessing the likelihood of winning arguments which move value around a sprawling enterprise. Note that unsecured creditors have little power in a bankruptcy case but the UCC as a combined entity can make things annoying for the debtor with various filings, diligence requests, and half-understood negotiating points. You'll spend a lot of your time helping out lawyers representing the UCC with drumming up arguments supported by half-assed financial data that was cobbled together. The analyses aren't necessarily accurate, but they are based on logic and are thrown out there in court documents and lawyer communications to get dialogue started and negotiations going

There's a lot more to say but I think I'll leave it there as a nice summary. Between Secured Lender and UCC type engagements, you're certainly interested in the sales pipeline to inform the financial outlook, but it's not a major workstream. You are always interested to know about the plan and will always push for details on that.

You are also interested in vendors and who needs to be paid and when, but there's a limit to that. For Secured lenders, there's potential lender liability when dictating the priority of payments; if you're caught doing that, you could be held liable for damage to the business. For the UCC, consider that UCC participants can often be customers, vendors, or unsecured debt. Customers will want the business to continue so they can continue getting product; vendors will want their fair share of payments and getting that will depend on the success of the restructuring and the Company's business plan; debt holders may want to avoid liability. In all cases, there are motivations which lead them to avoid digging too deeply into this topic. 

In short remember - "sit back and point fingers".

 

Missed your other topic. Hours per year depend on your billables. Consider that a 40 hour week of billables equates to 45-50 hours of time during the week. 40 hours over 50 weeks is 2,000 for the year. That's not par for the course - that's actually on the higher end for the year. To gather a target utilization, apply a 70-80% multiplier which gets you a range of 1,400 - 1,600. As a result, 1,500 for the year is average utilization given periods in between cases, and anything above that is gravy. That 1,500 may consist of periods of 100 hours per week and periods of 0 hours per week, and average periods in between. 

A&M folks may have a different perspective as they are all incentivized to get staffed and bill more; that incentive scheme may result in overbilling or creating extra work as a result.

 

Here's a generally accurate depiction of comp ranges at A&M by level:

  • Analyst: $80k - $110k base
  • Associate: $120k - $150k base
  • Sr. Associate: $160k - $190k base
  • Director: $200k+ (all-in can be as high as around $550k - $700k for Directors)

As it relates to how variable the bonus can get:

Bonus target is around 100% for Analyst - Sr. Associates.

Bonus target is around 150% for Directors

 

A lot of really good information in this thread already. I would only add a couple things from my experience at a non-big 3 turnaround/rx firm.

  • Interpersonal skills are key. Yes you need to have the technical skills to do 13 week cash flow and three-statement modeling, but you really need the people skills as well. Oftentimes you are working with people who are not happy they have to work with you. It can range form being suspicious/untrusting to openly hostile. This is common on the debtor side as a lender is typically forcing the borrower to bring in a consultant. That's not to say you can't have a situation where the company is happy to have you there, but not the norm in my experience. Being able to build trust and influence others is very important. At the more junior levels, it wouldn't be expected for you to have this skillset mastered, but you need to have some basic people skills and EQ. Walking into a client wearing a flashy suit acting smarter than everyone there will not get you far. 
  • Understand the basics of an ABL and a borrowing base. Distressed companies are often borrowing on their revolving line of credit to survive and function on a weekly basis. How much they can borrow is driven by their borrowing base calculation. You can be the best DCF or LBO modeler, but if you don't know how to read a borrowing base or associated loan documents, you will be in trouble. It isn't rocket science so google is your friend. Basic credit analysis is also helpful. 
  • Be okay with travel and uncertainty. I have had periods where I traveled every week M-Th for 7 months straight. Then I have had other periods where I haven't traveled for 3 months. I think this is the reason most leave the industry when they start having families and it makes sense, it will likely be the reason I eventually move on to something else. But the work is very interesting, you learn a lot, the money is good, and you usually aren't working consistent 80+ hour weeks like IB. But as with everything in life there are trade-offs, you will travel more and the pay isn't quite as good as IB in most cases (at least in the middle market, you might get close at an A&M/Alix/FTI).
 

A lot of really good information in this thread already. I would only add a couple things from my experience at a non-big 3 turnaround/rx firm.

  • Interpersonal skills are key. Yes you need to have the technical skills to do 13 week cash flow and three-statement modeling, but you really need the people skills as well. Oftentimes you are working with people who are not happy they have to work with you. It can range form being suspicious/untrusting to openly hostile. This is common on the debtor side as a lender is typically forcing the borrower to bring in a consultant. That's not to say you can't have a situation where the company is happy to have you there, but not the norm in my experience. Being able to build trust and influence others is very important. At the more junior levels, it wouldn't be expected for you to have this skillset mastered, but you need to have some basic people skills and EQ. Walking into a client wearing a flashy suit acting smarter than everyone there will not get you far.

In terms of client perceptions, I've seen it both ways. In many cases, the company has been going through an extended period of distress where people are overworked and processes are just horribly uncoordinated. In that instance, the company is glad to have some real experts come in to streamline things and get priorities straight. 

Perceptions can vary through the chain of command though. The most senior guys might be apprehensive because, as you mentioned, the lender may have forced the relationship. Or it could be the reverse, where the senior guys are thankful for the help since they're facing something unprecedented (like an impending BK, a negotiation with their PE parent, or lender negotiations), but the worker bees are all apprehensive to having to add more onto their day-to-day. I agree that having EQ and playing therapist is absolutely crucial.

  •  But as with everything in life there are trade-offs, you will travel more and the pay isn't quite as good as IB in most cases (at least in the middle market, you might get close at an A&M/Alix/FTI).

I think only A&M gets close to banking, but you will be working banking hours. FTI comes in at the bottom of the big 3, and you may be surprised to hear that smaller mid-market firms pay much more for talent than FTI does through the mid-ranks. At the highest ranks (i.e. Senior Managing Director), it all evens out since comp is a function of revenue share which is based on deals brought into the firm. Ultimately, RX consulting money is probably more in line with lawyers rather than bankers in the grand scheme. Both lawyers and consultants generally charge hourly rates, so that translates to similar pay structures. Given banking generally operates on fixed fees and percentage points off of large financing deals, there is room for significantly higher comp, particularly as you get up to senior associate and above. 

That said, trading years of life for a large bonus check can wear thin on your soul after awhile. You can buy a facelift or a transfusion from a blood boy but you can't really buy quality time with your family or get years back on your life. If you think you can, something's wrong.

 

Really wish more people in IB realized that they are doing untold damage to their health for these “bonuses”. They just walk around thinking everything is fine, because they are physically ok and not realizing they are shaving years off of their life.

Hard to prove a counter factual of course, but in your last days on this earth are you really going to be thinking about how many multi-billion $ deals you closed or how you barely spent time with your kids, grandkids, spouse…

Sad that A&M is like IB hours but as was mentioned above its not a consistent 80 hours, which is doable. Really appreciate everyone’s insightful comments above. Lots of food for thought!

 

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