In a restructuring, why are there both restructuring bankers (PJT etc) and restructuring consultants (A&M etc)? Is there ever a situation where only one of the above is on a BK, or does it always have to be both? Who typically is on more restructurings? Also, what's stopping a RX IB firm from having a RX consulting arm, and vice versa?
Just curious. Thanks in advance for any insights.
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RX Consultants - focus on operational side of the business; how do we think about cost structure, opex stuff, business level details
RX Bankers - focus on capital structure only; look at how the company is capitalized, types of debt and what we can do from purely a capital strucutre perspective to fix this business. Note: they will also almost always know the business level issues and what can be done but the consultants dive deeper and are paid for that expertise, while these guys think about capital structures only
In a bankruptcy setting, even if there is no RX Banker, there is almost always a RX Consultant - the consultant is often bought in as a CRO (Chief Restructuring Officer) in a BK; these guys step in to take control of cash and operations, create 13 week cash forecasts, variance reporting, help in stabilizing business from operatinal view, help coordinate on DIP lending reporting and covenants (although banker will oversee this) and any other work that can help the company (maybe workforce rationalization or some turnaround plans).
RX banker is bought in during complex capital structure restructuring stuff (things like 363 sale, new money needed, valuation and disputes regarding that). In addition to these both, there's always lawyers.
Usually, you will see at least a RX consultant and a lawyer and on top that a banker if there is some LME needed, usually a banker has already been working with the company and will help with the filing (pre pack); If its a sponsor owned biz, more likely for a banker to be present.
These guys don't open respective consulting or banking firms, as expertise is already pretty concenterated in big names on both these sides with decades of experience that would be irreplacable. A&M, Alix are really good at their consulting RX jobs and sometimes the only one in the filings (see hudson bay), whereas same for bankers.
Got it, thank you so much. A follow up couple of questions: out of the bankers and consultants and lawyers, who is generally more attuned to what's going on at a granular level, in a bankruptcy? Between the bankers and consultants, how do each "create" value (or is it moreso that the consultants create economic value, and the bankers structure the transactions)? Do the financial issues in a bankruptcy generally have an operational root, or is it more vice versa? Also, who has a broader scope of work generally?
Ibfeen1512 generally got most of the responses correct, for more clarity on your first question, the consultants do indeed focus more on the operational side, but nowadays their scopes have expanded quite a bit. As a disclaimer as well, the consultants typically know everything about the cap structure and transaction side as well, since their role requires them to be tuned into virtually everything going on. They frequently build their own valuation and transaction models and push back against ours if ours seems too starry eyed or unrealistic. See below for a response from someone else on a different thread talking about the stuff consultants do in more detail: www.wallstreetoasis.com/forum/investment-banking/restructuring-consulting-industry-outlook-common-exit-opps#comment-3747385
Generally two great career choices that teach you valuable skills, pay very well, and do set you up well for exits.
Great takes from both, and solid input on the "overlap" of the roles.
To add - Some consulting shops do have banking arms (A&M, Ankura) that focus on smaller deals mostly due to conflict of interest and to maintain relationships with other advisors.
Maybe a dumb question, but would an offer in a RX consulting firm's IB arm that you mentioned, or their actual RX consulting group be better for exits into RX IB or PE? On one hand, you get IB experience but on the other hand, the RX consulting brand is obviously stronger within the firm and likely more dealflow.
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