RX is Getting More Popular: What’s the Appeal?
I’ve been seeing a lot of discussions recently about RX becoming increasingly popular, and it seems like more and more people are preferring it over traditional IBD (M&A) roles. I wanted to hear everyone's thoughts on why that is. What’s so appealing about RX? How does it differ from classic M&A, and why do people make the switch?
and what do you actually do in RX? I know it involves distressed companies and debt restructuring, but I’m curious to hear more about what a day-to-day in RX looks like and what skills or background are really valued.
Also how can youbreak into RX?
Would love to hear your thoughts
Couple things to address here.
First - I rly enjoy RX. I never recruited M&A bc I think (sorry coverage guys) M&A is fundamentally boring and sales-esque. IMO, M&A is all about fudging the numbers as much as reasonably possible to justify either as high of a valuation (sell-side) or as low of a valuation (buy-side) as possible. It is all sales and there is very little actual strategic analysis (at least at the junior level). And before all the M&A guys MS me, we do M&A in RX as well (out-of-court could be a fire sale, a divestiture, etc. in-court we do 363's). Okay - I could go more into this but the point is it wasn't for me and I have noticed that people who do RX tend to actually find RX intellectually stimulating versus most of my M&A / coverage friends view it as a stepping stone / do not enjoy the work.
So, what is so interesting about RX? Well, first there is a ton more optionality meaning more transaction structures or "moves" we can try in a mandate. For example, a company has an upcoming maturity wall and will default. Let's say 3 months away. On top of this they are already in technical default on this tranche. First we will try and get an extension on the maturity, maybe a waiver or forbearance on key covenants. Let's say the creditors deny this, okay maybe we can do an exchange into a more senior tranche that pushes out maturities, increases interest to the creditors with maybe a grace period or PIK interest for part of it, while we are simultaneously running a sale process in case the exchange doesn't get the necessary participation before maturity. Okay now both of these fail and we are prepping a pre-pack Chap 11. Now we try and fund a DIP, roll up some of the fulcrum into the DIP, maybe they use their claims in a credit bid to buy the company, maybe a vulture comes in looking to take control. Etc etc etc. There is just a lot going on. Without going into details, I have worked on deals that ACTUALLY blow up on a dime's notice (instead of your weekend getting blown up bc some ass hat decides to accelerate deadlines unnecessarily, which also does happen lol). So - point is there is a lot more moving pieces in a given mandate and is IMO more interesting to conceptualize at a deal-level.
Worth noting that another reason why people break into RX is bc it arguably provides the most optionality in terms of exits. Obv, firm dependent. If you are at a T1 shop, you will get all the same looks as an M&A banker + preference for credit / distressed credit / special sits roles. I have peers who decided that distress wasn't for them and exited to MF PE. I also have peers at top distress funds. Also know a couple people now at Pod shops. Point is RX gives a ton of optionality.
Okay - day to day is hard to answer because it is so deal-dependent. Also depends who the creditors are, where the debtor stands in terms of how fucked they are (WHATS THE Z SCORE? Lol - kidding). So there really is no answer to that question. I could be spreading the credit docs for key covenants to get an understanding of the restricted payments and permitted investments section and see how we can move capital within and outside of the organization. I could be looking at the org-chart to get an understanding of unrestricted subs versus restricted subs. I could be modelling what draw looks like on a delayed draw TL we are trying to raise. Etc etc etc. It really depends.
How to break in - no clue. I am so grateful to be in the seat I am in. I feel as though I lucked my way into an RX seat that I absolutely love (to the extent anyone can love their job while working these hours IG). Some suggestions - read Moyers, the credit investors handbook, all the RXinterviews.com guides, and whatever other RX literature you can get your hands on. Also have a good sense of where the distress markets are, what sectors are facing higher rates of distress and why, what global factors might be influencing RX trends, etc. I guess the best insight I can give is you have to "love" or have a real passion for RX to break in (from what I have seen). That passion fosters intellectual curiosity which translates into learning. I mean I found my dumbass reading up on Argentina's and Puerto Rico's restructuring purely out of curiosity. Ok, I just read that last sentence back to myself and realized I was such a loser in college. Goddamnit.
Jokes aside; hope this is helpful.
Lots of great intel here on how to answer “Why RX?”
I am slightly on the spectrum. I find that ppl in rx are also slightly on the spectrum and at a much higher rate than M&A. I fit in better
This - was going to say Autism.
I usually skim WSO out of boredom to troll, but I gotta give props. The fact that you have self awareness conveys that you’re actually smarter than most. Keep crushing it man, and never lose that sense of humor.
Thank you for this comment. It is indeed refreshing. +1 to you and to Incoming Analyst.
More nerds trying to do finance. Doesn’t fit into E&P or NRG type places. Also a great place to be keyboard warrior with tangible wins
used to work at a distressed trade claims shop. One of the phrases from the MD was "In bad times there is always work, in good times there is always an idiot running his company to the ground". In a roundabout way... there is always work.
All the neurotic nerdtards who got burned out of coding different “like buttons” in Tech switched to Finance, in hopes of getting more activity on their Hinge account.
Hope that helps!
Perceived prestige seems to be the biggest driver in my opinion, and the nerdos who actually put in the work win the offer.
RX is so much more intellectually stimulating than M&A it's not even close. There's only 1 sellside process but there are infinitely many ways to restructure a company. Restructuring is a living, breathing organism that you must constantly adapt to keep up with. This is why you see the best talent gravitating towards RX.
Jesus Christ go breathe air man
Delete
Rx in any form is vastly superior to any other skillset you can acquire early on in finance, some will argue M&A however fail to realize Rx encompasses M&A as well (363 Sales). Unlike most jobs out of UG, Rx will force you to think like an investor, model more complex scenarios, move the capital structure, and negotiate with creditors and debtors. The smartest people have always gravitated towards Rx and will continue to do so as it provides the best training ground for finance, no where else can you oversee the whole of a company, its value, its problems etc. the way you can when its in bankruptcy. Exits are the best as well, you can go to MFPE buyout, Special sits, SM HF's, Credit etc. Rx is also generalist which means you can keep optionality for longer. Also M&A is deadly boring, its a sales lever both on the buyside with PE trying to sell LP's their strategy and Sellside with bankers piptching shit 99% of the time, M&A usually is a net negative for society, the acquirer, market competition etc. Rx saves on the other side. Would be curious why M&A vs Rx debate.
RX is borderline a joke IMO. Like 98% of what those guys do fails and everything goes to shit anyway. I guess if you're happy working hard to still make literally no difference at the end of the day...
You should read up on some of the LME's that have been going on before bashing it. Really don't understand all the hate in these comments. If it's not for you that's fine but to say it's a borderline joke doesn't make any sense like...why would there be a market / demand for an RX banker if we don't add value 98% of the time?
Flipping this on it's head...how often do companies overpay in M&A? How many M&A deals fail? How often does M&A lead to layoffs or dilution?
LOL do your research and see what they did with Latam, company is a rocket today and had previously went to 0 in Covid
Several others went to the grave OFC. But Rx is not about revitalizing a company. Rather to actually save some tangible value across cap stak holders from assets that are either going bust or that already did. Not to mention that you are trying to avoid wipping the sh out of some of the most senior creditors to the most naive retail shareholders (i.e. yeah no bullshit around, real stakes in play here)
Fucking nerds in the replies talking about being “intellectually stimulated” remind me exactly why I DIDNT go into RX. Some of you mfs need to go stimulate some pussy for once
xxx
And it’s gonna get worse. You can see dudes posting on Blind and the MBA Reddit saying they’re all gonna pursue IB because Tech is correcting. Lmfaooo!!!
We are so back
Yes, we are back.
So back!!
RX bros have more time to post online. Same reason I'd imagine a lot of people post on something like reddit on magic or yugioh or whatever. The it's not that they're more popular, it's that the perpetually online spend more time on it
Going to provide a counterpoint as someone that recruited for RX (loved reading Moyer) but ended up choosing a BB over EB RX - the people (both interviewers and in coffee chats) were genuinely dull and seemed to be even more overworked than their M&A counterparts. Yea, exits are great and the work is a bit more cerebral (although at the end of the day you’re still an output monkey), but the environment seemed depressed and people lacked the camaraderie you see in a coverage bullpen. Still great jobs, but I ended up prioritizing a more social environment over “intellectual stimulation”.
Lots of things said already, probably lots of it valid and people seem to have a real passion for RX. I did want to add a different perspective however. About 10 years ago I thought I was also surfing this forum. I suspect many people here interested in RX are on the junior end or in college. Like many here I was pretty sure that restructuring was the way for all the reasons mentioned above (‘intellectual stimulation’, don’t like sales, etc.). I also have quite a pessimistic disposition and a knack for calling bullshit, and in RX there is ample of room for both. So that seemed quite fun. Ultimately I joined one of the top consultancies rather than banking (don’t discount my opinions just yet…) and worked for a distressed company which I absolutely hated - shit management team, broken business model, everyone backstabbing each other to keep their jobs, initiated mass layoffs, random fire drills for rights issues, etc. And I was put off pretty quickly.
Regardless I just thought it was a bad one-off experience and recruited for some of the largest distressed credit hedge funds alongside private equity. To be honest the people were pretty soulless and no one seemed to enjoy what they did (nor ever sleep). Then I figured ‘Spec Opps’ sounded pretty good and gave that a try but it had similar issues. The dream would be to be a short seller and call bullshit on everything that’s wrong, misrepresented or plain dumb. If any of that resonates keep reading.
I ultimately opted for PE and very happy I did. The fact of the matter is that in most instances you need growth to make reasonable money. It also attracts better talent to work with particularly on the management side as many people realise this (and who wants to managed DistressedCo…). There are way more opportunities when things grow and you can still be creative / strategic (although maybe a bit less technical at times). The other issue is that RX and ‘technical jobs’ are a bit capped on the senior side. The key differentiator for a Partner / MD / PM in most finance jobs is strong commercial chops (not from a sales perspective but from a ‘should this company exist and why’ perspective - ie the equity story). You simply have very limited opportunity to develop this in RX as it’s just not relevant. That means that you’ll severely limit your fungibility / transferability if you want to change jobs or institutions - and a career is very long with lots of unknowns and things out of your control.
Don’t get me wrong, I’ll still be more pessimistic than others and call bullshit more and I thoroughly dislike sales-y bankers; but that’s just the cost of doing business and I won’t handicap myself out of spite for them. Life is too short
I wrote the long winded comment above. Just wanted to say I agree with everything you noted. Really good perspective here. Growth is king. Also want to highlight that two years in RX doesn't limit you from those opps if you choose to leave. Distress markets are becoming too efficient (i.e., it is rly hard to make the same types of returns in distress investing as it was say two decades ago from my understanding). +1 SB on the counter points. Good info
2nd this — RX itself is still very interesting but ShitCos are ShitCos for reasons…and they can be depressing
Not in RX Banking, but rather Opportunistic Credit -- a seat that's fairly rare/coveted coming out of college.
I genuinely love my job. It's hard to put in words, but in many ways my job is to learn (about industries, companies, processes, laws, etc). It's cliche to say every day/deal is different, but I've found that in my seat, it truly is. These days I'm social, enjoy going out, etc, but at heart I'm very much a "reformed nerd" -- I truly relish the opportunity to learn.
I previously interned at a PE fund with consistent top quartile returns -- I know what the "other side" is like. Vibes of the team were good (and obv the process was successful), but the work was so incredibly formulaic that even in 10 weeks I felt insane.
In any junior finance role there will be a lot of excel/ppt, but if you want a variety in what you write/think about, roles in the RX/Distressed/Special Sits/Opportunistic world are the way to go.
That said, unlike others in this thread, I don't want to shit on M&A/trad PE roles in any way. People make a lot of money doing those jobs, and there certainly is room for "skill expression" as you progress in those careers. Just don't think it was for me.
Both types of roles are "finance" jobs, but are incredibly different. If you give it some thought, you'll naturally be drawn to the one that's right for you.
It’s hard to predict in advance what you will accel at or find interesting. My coverage group was my last choice. Then my vertical was my last choice. And a few years in I ended up enjoying it
sorry but need to remove a bit the "mystique" of Rx or hype from other comments
Those that do Rx do it because it has this overlap with law, so it seems to give a more "complex" touch. Other than that, M&A = selling the upside when times are good, RX = selling the upside when times are bad, because at the end of the day after removing all the legalese of RX, Rx is just to show that "this company can be worth X amount, if we all agree to take a cut on our claims". Moreover, lawyers will often dictate what can be done and how much of the claims each one is entitled, meanwhile bankers do the scenario analysis on debt swaps/write-offs/etc. until all parties check it and say "okay, I think this is reasonable to all" and they sign the plan of reorganization
as someone who studied law, I think that M&A can be more educational/creative because you need to know the industry/learn the companies and think about growth/opportunities, while also persuading people to jump on a deal, meanwhile for Rx, once you know the law, Rx is pretty scenario-driven focus with a closed range of possibilities. Also, I often hear non-JD trained people to be the most excited about Rx, meanwhile for ex-lawyers working in it it's just the same as M&A or any similar finance role, nothing as special as the green comment portrays it
also, let's not forget the bias that more nerdy-people will be the ones predominantly using forums and thus will also echo nerdy fields like Rx. If you ask your classmates irl what they wanna do, probably the majority are still interested in M&A/S&T
Agree with most except for the last sentence. People are less aware of RX because they just follow the advice to go in M&A they've been told too and they don't want to put much thinking -which is fair, nothing wrong with following the classic path when you're a bit clueless and chasing money.
There are way less seats in RX so I would assume ppl in the field are more passionate about their jobs vs M&A lads. I think the image of RX is also tough, much associated with vultur funds and hard '90 PE breaking businesses into pieces and firing half of the FTEs within 3 months of taking over
even for the informed people, be aware that in RX you're dealing with extremely conflictive people (money is at stake) and also you're working on shitty companies (because a good company no matter how bad mgt. is, still remains profitable because of their products) so can be quite miserable at times (at junior levels you just doing the models, you won't feel it). So it's not really that people "aren't aware about RX", it's just that it requires different characters and interests.
and on "breaking biz into pieces/firing people", I am quite sure this is not the view that people have about RX because there isn't much value to unlock by breaking it anymore and that's why the claims need to be cut to allow the company room to breath. On the contrary, PE even nowadays fits the concept that you have about "'90 PE breaking businesses into pieces".
Easy example, but Caesars (before being a Ch. 11 candidate), was acquired by Apollo and TPG because part of the thesis was that unlock immediate value by separating the hotel/lodging business from the casino business because the market was pricing it at a lower EV/EBITDA due to the conglomerate discount. Next, they also separated the real estate into tax-efficient REITs and sold others (at peak of housing prices) to use the proceeds for reinvesting in the casino business because the thesis (before 2008 crisis) was the Las Vegas will boom and gambling licenses will also be limited. Obv, at the end, the thesis didn't play out because 2008 was unforseen when the strategy was unfolding.
Then, after all this PE gamebook, you get the RX side which is basically looking in the past, understanding where the claims are, what are the debt amounts, and decide how to split the remaining of the pie which can be a LOOOONG negotiation process.
so this is what I'm trying to say, that creating the upside requires more creativity because there are no limits on the box, which isn't the case on bankruptcy law, the realm of the game is set by the limits of the law. So again, need to choose carefully what you like and not follow the RX hype just because someone thinks that dropping "fulcrum security" asserts dominance.
High quality comments in here but I’d also like to challenge your premise. RX is popular at this exact moment because insolvencies are at a 10 year high. Inevitably the tide will come out at some point in the future and it will be another dull 5-10 years with minimal activity and limited upside from focusing on the space.
Ex-RX here. No offense meant but this is completely off. The top 2 RX firms and others to a lesser degree print repeat business through liability management for sponsors or creditors. Much less cyclical than people think. PE will always be overlevering their shitcos, that is never going out of style.
This is correct. The OPs question, however, was “why is RX getting so popular [right now]”. While there will always be steady RX business, the abnormal activity right now is supporting a higher amount of activity in the space, more hiring, more excitement, etc., beyond the core players who always clip solid business. I didn’t mean to trigger you.
By the way, numerous RX advisory firms are seeking external capital at this exact moment because they are printing money from a favorable market backdrop.
Guys in a restructuring you need to prove the growth and turnaround story to actually come out with a viable plan that is approved by all parties. Otherwise it is wound down and liquidated. You are not sacrificing that when working on RX deals. In traditional M&A that is all you are doing and let's be honest, it can be very formulaic. Out of the 10 CIMs I built for different companies across different industries, they each had nearly the exact same "investment highlights". It is not differentiated. It is commoditized. But I till think M&A is a great place to build a career.
del
nerds
I don't think anything pisses me off more than RX people acting like everybody other coverage/product is filled with coneheads who have 0 interest in what they do. Believe it or not some people find interest in things other than overlevered shitcos!
Basically, because banking has gotten way too nerdy and RX is now a hotspot for anti-social nerds. This needs to stop. We need to return to the culture of the late 80s to weed out these unwanted, sensitive nerds from the industry.
This is a sales business first and foremost, and the nerds trying to break in should go into computer science or back to collecting Pokemon/Digimon cards or whatever you nerds do. I had a picture of Chuck Norris on my wall as a kid, you had a picture of Count Dooku and watched Jimmy Neutron. Nerd.
Nobody cares about Index Match, Offset or Xlookup, or your fancy little formulas that do not impact our ability to win mandates. If you honestly think you're so smart, go into a field where you can nerd out. Not IB. Seriously. Can you ultimately win clients and sell a deal to a client when it matters? That's what makes this industry special. Any AI software can build financial models and make pitch books. It's the human touch that stems from your real personality, that ultimately makes bankers special and makes clients want to work with you.
RX is full of nerds. People who are culturally too inept to fit into a more "masculine" environment where work isn't the only topic of discussion, and the work culture is quite direct and straightforward. Nerds tend to be overly-sensitive and antisocial.
who hurt you
when trump pivots from 'the stock market is my barometer' to 'we need the 10y lower' all the rx boys suddenly come out and say we're in a golden age of rx
Came here to say things you do as an analyst at a rx group is very far away from skills needed for a PE role. So for many of my friends that went to PE after rx, they either did oncycle or have to study/think a lot more about the PE process than your average M&A analyst that works on sponsor-backed sell sides
So wrong lol. At a MFPE and the analysts that came from RX are far and away recognized as the best (although granted their groups are top of street programs). An LBO is, by definition, a recapitalization (the same thing u build for every RX txn). And let’s face it, at least 50% of the work I do on a day-to-day basis is process stuff which is equally practiced in RX and other groups; given RX analysts usually leave w 2-3 more deals than your average M&A analyst, one cud argue you get “more reps” here. Unless ur going to a tech-specific/ industry specific PE shop, u get enough investing exposure at virtually all IB roles (maybe incrementally more credit exposure vs equity exposure in RX / M&A, respectively); only a small handful of pe roles will appreciate industry expertise in their asoc (unfort still a grunt lol)
I don’t think you worked in RX. I worked in a EB rx group and I can tell you from my own experience interviewing for PE firms is that rx banking focuses on everything below Ebitda, but PE spends a ton of time thinking about stuff before it. In RX, you don’t get the necessary training thinking about top line growth, margin expansion, capex, etc. These are the more important things to PE. I ended up at a distressed credit HF, but all of my rx friend at PE are all thriving. Not because what they did in rx, but because they are inherently self-selecting hardos.
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