Pros & Cons Summary - Post-MBAs in Restructuring (RX) - any regrets?

To any Post-MBAs who pursued a longer-term career in restructuring - I'd love to get your thoughts and insights on your career so far, whether you are happy with the decision, or have any regrets and so on. I'm about to start my MBA at a top finance school (Wharton / Booth / Columbia) this fall and would love to hear your insights on this.

From surfing WSO as well as speaking with various people, I've compiled the following pros & cons of a long term career in RX:

Pros:

  • The work is complex and interesting - each restructuring situation has its own unique circumstances ad therefore the solutions offered are specifically tailored to the situation, instead of it being cookie-cutter as it can be at times in regular M&A. RX bankers develop a heavy technical skillset both on the financial side (cap structure / distressed M&A) as well as the legal side (navigating credit agreements / bond indentures) - essentially a half banker / half lawyer hybrid. Likewise, all RX professionals I've spoken with have told me that they do find the work intellectually stimulating, given the technical nature of the product.

  • Great Job security - RX is countercyclical so during downturns it thrives. In a bull market, RX teams tend to run lean to begin with so it's quite difficult to find competent replacement hires given the niche / technical nature of RX - hence layoffs in RX is not very common. One RX banker put it this way - if you're an EB looking to cut costs, who would you try to cut in: the 15-person RX team or the 150-person M&A team?

  • Compensation is great - given that most RX roles are in independent advisory shops (PJT/EVR/HLHZ/LAZ etc) pay is quite generous (up to 250-300k all in for 1st year associates) and sometimes surpasses that of the M&A folks.

Cons:

  • Hours are always Brutal (is it?) - I've heard a bit conflicting views on this so I'm admittedly unclear. Some have told me that the hours are absolutely brutal at all times (one full time analyst working in a BB M&A group explained how the EVR RX roommate would come back home later and leave to the office earlier than he did everyday), and that it's worse than that in M&A. On the other hand, I've also read instances and spoken with individuals who described that their hours are not too bad during bull market times (PJT / HLHZ to be specific), and that brutal cases usually are from when market heads into a downturn (like right now, during covid) as RX teams are kept lean so the sudden influx of dealflow exceeds capacity.

  • Promotion to MD is more difficult - a VP level RX banker explained to me that the promotion path to MD is much more difficult than in the M&A side, as MD promotions are determined based on ability to bring in deals and there are only a limited number of RX deals (relative to M&A deals). As a result, the VP to MD promotion is a bit of a crapshoot and requires some element of luck and timing (i.e. a downturn comes by and you suddenly get an influx of distressed opportunities to lead / originate). As a result there are several cases particularly in bull markets where RX bankers get stuck at the VP level for longer than expected, and promotions to MD can take much longer than the standard 3 yrs Associate / 3 yrs VP / 3 yrs Director / MD timeline that we see in M&A. Also noted that there is no "Director" level in most EBs (just straight VP -> MD) which further exacerbates the length of time needed to serve as a VP.

  • Vacation time is impossible - One RX person had told me that the one thing he had a tough time in RX is that going on vacation for an extended time (1-2 weeks) is very difficult due to the length of the mandates in RX. Typical RX mandates last 8+ months so if you are on a RX mandate, you basically cannot go on vacation during that period. This is a contrast to M&A where the vast majority of the deals are quite shorter (2-3 months on avg) giving them a bit more leeway. Also M&A deals tend to fall apart often as buyers / sellers can just walk away at any time, whereas RX mandates rarely fall apart in the traditional sense, given that a company that is approaching bankruptcy will be in a position where it's forced to take some sort of action - just a question of which.

Would be great if anyone (specifically post-MBA RX folks, or anyone pursuing RX as a long term career) could confirm or debunk any points above and comment on anything they'd like to add with regards to a long term career in RX. In particular, I'd love to hear your thoughts on what you had expected in RX before starting work vs. what you had realized (or wish you had known) after you started working.

Thanks again.

Comments (17)

  • Intern in IB - Gen
Jun 10, 2020 - 3:15am

+1 for this. Would love to hear about the life of a post-mba RX banker. Also interested in how hard it is to recruit for RX specifically in an mba program

  • Prospect in Other
Jun 11, 2020 - 12:40am

Do they have time mid-day to mess around with other associates while waiting for comments? Maybe not now, but in bulk markets? It seems that a lot of M&A people I talk to say that the "80" hours is more like ~60 hours of true work with that horsing around time in between.

  • Analyst 2 in IB-M&A
Jun 10, 2020 - 1:29pm

Huge rx con from an analyst friend at my firm.

The work is sort of soul-sucking in a sense that its usually a lose-lose situation for both the debtor/creditor. In M&A/Capital markets activity once a deal is done everyone goes home happy (not always e.g. hostile takeover) however in restructuring for 95%+ of cases you have to deal with very hard to deal individuals. Hes been on 4-5 rx mandates and while the work is indeed interesting he seems a bit depressed due to the nature of the work.

  • Associate 1 in PE - LBOs
Jun 10, 2020 - 9:00pm

Here is another con: RX is pitch heavy

There's not many repeat clients given that once a company exits bankruptcy they would refi and move on (basically LevFin groups would take over from that point). Hence in most scenarios, the company is new to the bankruptcy / distressed scene and will hold a beauty contest to see who represents the debtor. Once the RX banks pitch for that and the debtor advisor is selected the remaining RX banks who didn't win the debtor role will pitch to represent the various creditor groups. Basically a ton of pitching

Jun 11, 2020 - 12:17am
odog808, what's your opinion? Comment below:
Associate 1 in PE - LBOs:
Here is another con: RX is pitch heavy

There's not many repeat clients given that once a company exits bankruptcy they would refi and move on (basically LevFin groups would take over from that point). Hence in most scenarios, the company is new to the bankruptcy / distressed scene and will hold a beauty contest to see who represents the debtor. Once the RX banks pitch for that and the debtor advisor is selected the remaining RX banks who didn't win the debtor role will pitch to represent the various creditor groups. Basically a ton of pitching

Good comment.

I'm not in this field but I was once interested in bankruptcy law as a career. The advice I got was there was not much repeat business (obviously with BK). If partner level worth is future cash flows, then harder to raise and keep a book of business in these situations. I could be wrong.

Have compassion as well as ambition and you’ll go far in life
  • 5
Jun 11, 2020 - 2:33pm
ebitdurrrr, what's your opinion? Comment below:

I'm not sure this is totally accurate. On the creditor side, you frequently see a lot of the same creditors in a lot of rx situations and having relationships with them as a banker is a large source of business.

In addition to that, there are far fewer groups with solid rx bankers with a ton of relevant experience than there are M&A groups out there.

Also, most sizable rx situations often include heavily-involved legal counsel as well as restructuring/turnaround consultants/FAs (A&M, FTI, etc.). All of these parties regularly act as referral sources for each other.

Even if, on the debtor side, they're all one-off situations (which is also not totally accurate since it's more common than you'd think for the same company to fall into distress a couple years after a restructuring), the combination of the above factors results in a lot of the same rx groups winning a lot of the available mandates.

In summary, I think pitching activity will depend more on the nature of the specific group you're working in, than as a function of whether you're doing rx or M&A.

Jun 11, 2020 - 1:35am
xyzzz, what's your opinion? Comment below:

Thanks for the insight and write-up!

Array
Jun 11, 2020 - 10:17am
marcellusgreen, what's your opinion? Comment below:

Been in RX for a few years

Pros:

  1. Work is relatively interesting - In addition to capital structure nuances, each deal can have its own idiosyncrasy - difficult stakeholders, fraud/criminality, international jurisdictions etc. which make that particular deal interesting. However, once you do a few deals in a certain industry, things can follow a similar pattern and get a bit stale.

  2. Constant dealflow - Obviously depends on the shop you are in. But we are in an economy that has been over-levered for a long period of time. Some companies need to go out of business but are allowed to stay on even after a comprehensive restructuring/Ch.11. Lower interest rates will almost certainly result prolong this trend allowing these zombie companies to survive resulting in multiple rounds of restructuring.

Cons:

  1. Work/Life balance - Depends on the deal. If you are on a deal that is time sensitive (company is close to the brink of filing) you can kiss your life goodbye for a few weeks/months. If its a less desperate situation it may not be as bad. Generally, the first couple of months in a deal will be really busy and then over time things tend to get better and you will get your weekends. Other aspects that influence your work/life balance are whether you represent debtors/creditors (debtor representations are much more intense etc.), what kind of shop you work for (FA vs. IB etc.).

  2. Not so great outcomes - Like someone alluded to earlier, the company/creditor is not always better off after the deal is completed. Sometimes the restructuring ends up in a liquidation and the Company has to be dissolved - makes you wonder what you are getting paid for. Most stakeholders depending up on their security position generally try to keep the company alive so they can exit once the market recovers - this means that the Company continues to keep a ton of debt on their books and is not necessarily deleveraged/better off.

Other things like career progression are dependent on the shop you work for. I don't necessarily believe there are no repeat clients. If you have strong creditor side relationships with banks/funds, they will use you for multiple restructurings with different companies. Similarly if you know certain sponsors/board members they will use you for the companies they own/represent.

Let thine own self be true
  • 4
Most Helpful
Jun 11, 2020 - 8:47pm
10x Leveraged, what's your opinion? Comment below:

If you're looking at this as a long term career, make sure you're actually interested in the legal aspects of RX. I think the legal aspect of RX is very understated, especially as you look to move up the ranks to VP and above.

When people say RX is very technical, they're not really referring to the finance / modeling aspects of the job (although this can get complicated too) - they're really referring to the legal side, which can get incredibly complicated (esp with regards to org structure, and implications on security, guarantors etc). Does the idea of spending several hours scrutinizing credit documents line by line alongside lawyers to search for a potential legal loophole to funnel specific assets into a separate Opco excite you? Let's say the definition of permitted RPs was quite loose and you actually try to pull it off. Creditors see you're trying to hide away some of the hard assets into a separate Opco and retaliate by suing you. If the judge ends up siding with the creditors, what is going to be your Plan B? I'm not saying the financial modeling aspects of the job is less important but at the senior levels, it's really your knowledge and mastery of the legal aspects of credit / bankruptcy that drives the game theory aspect of RX

Anecdotally, I have some peers who pursued RX roles just because it was deemed a "more prestigious group" with better exit opps. They ended up hating it because they disliked the heavy legal aspect of the job, and delving into PACER / credit documents all day. Make sure you know what you're getting yourself into.

Array

  • 9
Jun 13, 2020 - 9:57pm
dore31, what's your opinion? Comment below:

Send me a PM - I'm starting at one of the schools you mentioned this fall so we might be classmates. Did my analyst stint in RX and very nearly made a career out of it before transitioning to value-focused PE shop. Really enjoyed RX and (biased) opinion is that it's the best segment of IB to work in at any stage in your career.

Edit to add: Definitely want to flag the hours though. When a RX ramps you're REALLY busy like several weeks in a row of 120 hours before settling back to 90 hour weeks and still cranking. Trade off is even analysts and associates having 50-60 hour weeks when it's slow and MD / director types obviously never put in the crazy hours.

Jun 14, 2020 - 12:41am
10x Leveraged, what's your opinion? Comment below:

If you don't mind sharing with the rest of us - what were some of the main reasons that got you to personally consider a career in RX and what were the key factors that got you to reconsider and pursue the value-focused PE shop?

Array

  • Business School in IB - Restr
Apr 29, 2021 - 8:13pm

I prefer the work to that of M&A, but as mentioned in another thread, the current environment/limited opportunity set in the distress space is a bit worrisome. Probably not an ideal time to be starting in Rx right now, but it's difficult to consider market timing when you're still in school and some Rx teams may be busier than others right now...

  • Analyst 2 in IB - Gen
Apr 29, 2021 - 8:21pm

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