I thought about the different parties involved in restructuring - the banks (lenders and advisors), law firms, liquidators, operational/turnaround consultants.
I think it may be a good idea for an IB like LAZ to acquire a turnaround consulting firm. Lenders/BBs are unable to really get into restructuring advisory business due to conflicts of interest, but the restructuring bankers and turnaround consultants may make sense.
Or they may just hire away a few MDs and start their own branch. Or maybe even the accounting firms. I noticed the deloitte acquisition of bearingpoint, although restructuring consulting wasn't BP's core business, deloitte has reorg. I see a lot of room for consolidation in this area.
Anyone else thinks this makes sense or any reason why it doesn't?
You end up with a conflict of interest. If you serve as a turn around advisor to the company in bankruptcy, you are not able to act as financial advisor as well.
yes--- plus, firms like to get advice from more than one place & compare it; plus, I'm sure the creditors committee would protest
That's a good point Cornelius. In the middle-market, places like Deloitte or PwC basically act as financial advisors as well as operational consultants. If Lazard bought Alvarez & Marsal for instance, you'd pretty much have a restructuring one-stop shop on the advisory side for bigger cases. But this might not make sense in different market conditions. LAZ investors might feel weird about owning a big shop like Alvarez or FTI, even if they only bought their turnaround division. I suppose you could always spin them off once the market recovers.
I honestly don't think there would be a conflict of interest. When you compare the duties/responsibilities from the FA and investment bank, you'll notice a lot of overlaps. For example, if Alvarez and Lazard are both advising a company, a responsibility for both of them may be to manage and analyze short term liquidity. Both the FA and Investment Bank have the same goal at the end of the day-to bring the company out of a chapter 11.
right. balance sheet restructurings, distressed M&A, pre-packs, in and out of court bankruptcies are duties handled by both firms.
bankers are better at M&A and dealing with financings, but the consultants negotiate pricings, deal terms, etc.
to me, a one stop advice type shop makes sense. i guess sometimes, clients like to hear differing opinions which may be the reason for this segregation.
anyone know of firms that have a turnaround consulting arm and an restructuring/M&A advisory investment bank?
The world has changed. And we must change with it.
This model that you are referencing already exists. FTI and A&M both have small M&A advisory groups, but the issue is they cannot run a sale process and act as a turnaround advisor, because there is a conflict of interest and it would not go over to well with the people holding the credit.
This model that you are referencing already exists. FTI and A&M both have small M&A advisory groups, but the issue is they cannot run a sale process and act as a turnaround advisor, because there is a conflict of interest and it would not go over to well with the people holding the credit.
The world has changed. And we must change with it.
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