An Outsider’s View of RX Banking Out of College

Just finished my VP stint at a large distressed investment firm. I came from an industry group but work almost exclusively with folks from the top 2-3 RX banks. I’ll state at the outset – I’m not bashing my RX colleagues nor that path as a career option. My colleagues are incredibly smart, immaculately pedigreed, and are by all accounts better than I am at this job. So that may be all that matters, case closed. 

What follows is intended only for college kiddos to be a touch reflective on their career paths and the RX-worship echoing through this forum. My central thesis is that most people (not everyone, but most people) are probably better off picking an industry group they find interesting or a more “generalist” product group like M&A than chasing the 4-5 RX banks everyone talks about on here. (I’ll also say that most people are better off doing buyside recruiting their second year, not their first.. but more on that later.) Some observations:

• Most RX engagements will have an industry team and an RX team working together. The RX MDs (i) don’t have time to really learn about the business, (ii) still get asked a lot of questions about the business, so (iii) tend to digest a very surface-level set of talking points for use in calls. The impact of this is that many of my RX colleagues come out of banking severely underdeveloped from a business perspective; then they’ll say things like “oh, this business is really just a bet on housing starts” or even worse “I just think it’s a good business”, which is what their RX MD would have said. When a PM says it, fine, but it rings hollow from a first-year associate who still doesn’t know anything about the industry. 
• Legal / doc analysis is naturally a redundant skill set, given every deal of scale will involve hiring a law firm anyway. With the advent of AI, all of our jobs are effectively redundancies.. but this effect is probably more acute in doc review than in any other workstream in finance. 
• RX really isn’t that transferable outside of a very niche set of firms. I know, I know – your one friend from PJT RX went to Apollo PE. No question it happens. I guarantee it has 100% to do with “caliber signaling” being at a top bank, not “Apollo thinks your RX knowledge will be helpful”. Can you not get similar caliber signaling at other top groups but actually learn something useful during your business stint (like how a business makes money)?
• With college recruiting continuing to shift earlier, we’re already screening for people whose parents run hedge funds. What other freshman knows they want to do investment banking? Now imagine that same fact pattern, except the freshman is convinced he was to do RX investment banking – we’re even more acutely screening for privileged people and/or nerds who grew up around the industry. It’s a very particular flavor of people, and that’s the same at all of the RX shops I’ve seen. No judgement, just an observation.  
• Crappy business bias is real. We spend 100% of our lives dealing with broken businesses, broken sectors, and fraudy/sketchy/incompetent leadership teams. Sure, it’s a bit depressing. But even more, I think my finance education is warped from never spending time with well-run companies in good sectors.   
• Final point – at some point, most of us want to slow down. For most of those people, it involves working for a company somewhere. The number of “companies somewhere” that are looking for an RX background is vanishingly low. They’ll want someone who has seen how an industry and a business works and can take on a corp dev or strategic finance role. Even if you don’t ultimately go this route, the option value of knowing something outside of a highly niche RX process is a huge psychological benefit. 

Again, only purpose of the post is for the college students getting ready to study RX technicals all night to take a step back and consider whether that’s what they want out of life (well, the first 5-10 years of life). If it turns out that your waking thoughts in college really are focused on restructuring, then you’ll probably be a great fit.