Q&A: VP in Restructuring

I work in credit and often hire FTI / A&M, and can confirm that juniors do receive compensation based on hourly billings. That said, I don’t believe total comp is higher than banking at the junior levels except at A&M. 

I had mentioned that comp was easily over $200k; did not want to share exact numbers. Base salary currently $140k - $160k for reference; bonus can be as high as 100%+ of base salary. It is standard that in this industry, many firms do apply a quantitative measurement of what your year-end bonus payout will be using your total billable hours for the year. That is a big piece of it, with a portion being discretionary.  

I was not in valuations when in TAS (was in FDD performing QoE's for buy and sell-side mandates). Having the ABV along with the CPA was a shortcut to exempt me from 1 of the 3 parts of the CDBV (Certification in Distressed Business Valuation). Having an audit and TAS background is a very strong combination of skills to possess in restructuring, as you need to have an understanding of the complex accounting concepts and mechanics of how the financial statements of a business are created. Couple that with the due diligence side of M&A deals serves in your favor when standing out among the candidate pool.  

The #1 reason I can give about how I like the restructuring environment is that you're literally on the front line trying to keep businesses from failing and causing substantial losses to not only all the creditors/stakeholders, but also saving countless jobs that would've otherwise been eliminated in a Chapter 7 liquidation. It's a domino effect many times where it's not limited to just the Debtor facing liquidation - think about all the Debtors' vendors who in turn rely heavily on the sales of the Debtor. If the Debtor goes out of business, many of its vendors may follow suite shortly thereafter. There's a high level of satisfaction entering the beginning of a deal and watching a highly distressed company be able to turn things around back to a profitable, growing company by the end of the engagement.

This industry typically consists of a vast amount of former business owners, CEOs, CFOs, etc. When handling interim crisis management work, once you're senior enough, you'll be the one serving as interim CFO or CRO for example. So without a doubt, this industry primes you to be on an accelerated track to being a CFO. You're skillset becomes invaluable, as you've continued to gain experience in all unique situations where the underlying root problems start to become familiar and the steps needed to remediate such issues (whether through an operational or financial restructuring).     

Could you please explain what exactly you mean with more detail? 

Being able to see the bigger picture and outlining the core considerations/areas of focus in its simplest form to the MDs under extremely tight deadlines. Ultimate focus is on how you can make your MD's lives easier from the work you produce. You also really need to have really thick skin to be in the game due to how extreme the stress is and how short of a fuse many people you will work around have. 

Rx advisory definitely did not experience the level of workload anticipated in 2020 due in part to the series of massive federal stimulus and lender flexibility with Debtors over the course of the year. However, this is only delaying the inevitable that we're starting to really see come back as 2021 progresses. Stay tuned - it's going to be insanely busy in the Rx world for the next 4-5 years.

That's highly variable, so I cannot give you a straight answer to that. I would refer to salary insights available from WSO or other alternatives. 

Generally, the ABV doesn't really matter much. The core certifications you would see among those in the Rx space are Certified Turnaround Analyst/Professional (CTA/CTP), Certified Insolvency & Restructuring Advisor (CIRA) or Certification in Distressed Business Valuation (CDBV). Business valuation is just a piece of the overall role in the industry (also dependent on what type of Rx role you're looking at). 

To get the most out of your experience, try and take a step back to understand the bigger picture behind the deals you're working on. Understanding the rationale for why a company is being recapitalized in the first place and the analysis that went into how that was structured will provide a lot of insight. If it's a sales process, understanding the nuances of why the target is being sold outside of Chapter 11 or whether you're running a solicitation process for a stalking horse bidder in advance of filing for Chapter 11 to set the stage for an auction process with a Section 363 asset sale. Thinking about all the stakeholders involved and what % recovery the creditors are receiving from the sale proceeds versus what they would've received in a pure liquidation of the company (if liquidation yields greater return, then there is no transaction that would occur since it would be against the best interests of the creditors). 

Ask good questions, be reliable, never make the same mistake twice, have excellent technical modeling skills and turning an accurate/high quality request from an MD ASAP (as this is an extremely fast-paced industry where time is not on your side).      

It would help somewhat since you're evaluating the creditworthiness of companies and the likelihood of defaulting. However, you would need very strong modeling skills (3-statement financial modeling, 13-week cash flow modeling, liquidation analyses, etc.) which requires a strong understanding of both accounting and finance. Getting directly into restructuring out of college is extremely hard - people are typically making a lateral move from another IB role or have at least several years of relevant consulting experience under their belt from a respectable firm. Start proactively reaching out to individuals in the field from different banks to see if they can speak with you about how they got into the role, what information they can share about their experiences and what the recruitment process generally looks like.  

13-week cash flow modeling is the bread and butter of the role. I'd recommend that.

Highly variable on the type of firm, how well the business performed in the year and what new business the MDs specifically brought in during the year. At my firm, most MDs clear at least $1M. 

Sounds like you're on the right career track based on your background. 2 years of relevant professional experience, yes? What's your goal? Turnaround & Restructuring, IB Rx or distressed private equity? 

Sure, so to answer your questions:

• A bit on Rx IB: More focused on capital restructuring for distressed companies (modifying the terms of their secured debt or negotiating a debt-for-equity conversion, as an example) in order for the company to continue operating without the stress of missing another interest payment or defaulting on its debt obligations that have become to burdensome to service. In other instances, they are involved in an out-of-court sale or 363 asset sale in a Chapter 11 bankruptcy with the goal of maximizing recoveries to creditor classes.  
• Rx Consulting: More so management consulting (typically turnaround & restructuring advisors or "crisis managers") that come in (typically upon a demand by the company's lenders when a covenant violation has occurred) to independently review and remediate the stressed company by identifying the root causes that caused the business to suffer in the first place and implement a turnaround action plan to stabilize the business. They will put together a 13-week cash flow model and present findings to the lenders/equity sponsors with strategic alternatives illustrating the course of action under each scenario. They will indicate if its feasible to bring the company back to profitability or if the company is too far gone, in which case, they work to try and maximize creditor recoveries on their investment. 
• I personally find the Rx consulting side more interesting, but its a matter of preference. Both groups work unpredictable hours that can get fairly extreme with a lot of stress to get something done very quickly (and accurately).
• Distressed investing is extremely interesting and tactical, as you can deploy so many creative strategies with significant upside potential for a remediable business (assuming you weren't buying the stressed business for pennies on the dollar to liquidate everything with the assumption that liquidating the business would yield a greater return). I can share more about the various strategies if you want to DM me. 
• I cannot speak to the hardest decisions I've had to make because in this arena, every decision is critical in an already very tense work environment.   

Absolutely - if you have 3 years of Rx experience at a Big 4, you really shouldn't have a problem attracting attention to one of the consulting firms you indicated within their Rx group. 

1. Bulge Bracket presence in Rx is trivial (not really a group at most of these banks) primarily because they have large balance sheets. Taking it a step further, conflicts of interest among various stakeholder parties in a transaction may prevent these banks from touching most of these deals. That's why Rx is primarily spread across MM and elite boutiques. But Rx banking doesn't require the underlying bank to provide the capital itself. It's like a sell-side M&A deal where the advisor shops around various alternative private lenders (as opposed to strategic and financial buyers) for credit terms and structures and negotiate the best possible solution for the company. 

2. It's definitely possible to break into Rx IB as an associate with your background depending where you plan on targeting your interviews at. I would say that it's good experience that can help support your chances, but you better have a solid understanding of the credit markets as opposed to equity markets and be able to discern the differences in how you would approach analyzing a situation.