Am interested in Distressed PE post-IB, but know little about the day-to-day work in the space. Have heard there is a heavy legal emphasis (which I'm fine with) but have also heard some say it's very quantitative (which I could be comfortable with, depending on just how math-heavy it is).
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Distressed Private Equity (PE) involves a mix of both quantitative and qualitative work, but the balance can vary depending on the specific strategy and focus of the fund. Here's a breakdown based on the most helpful WSO content:
Quantitative Aspects:
Qualitative Aspects:
Legal Emphasis:
In summary, distressed PE is a blend of quantitative and qualitative work, with a notable legal emphasis. While the quantitative side isn't as math-intensive as some other finance roles, it still requires strong analytical skills. If you're comfortable with financial modeling and have an interest in legal and operational challenges, this could be a great fit for you post-IB.
Sources: Distressed / Spec Sits vs Regular PE, Distressed vs. Credit vs. Special Situation vs. Turnaround PE, Q&A: Distressed/PE Associate
Highly quantitative. Imo more intellectualthan standard M&A because you have to understand the math and the law. Need to handle a 200-page legal doc and a messybroken balance sheet at 2 AM
Makes sense. Would you say it's the kind of thing one should stay away from if you're not really a "quantitative" guy, or if I can handle LBO/DCF modeling this isn't too big of a leap?
like for example I would never think of venturing into quant finance or engineering (which I assume are more math-heavy than distressed PE) but I also don't struggle with the kind of modeling in IB
also not worried about the legal-heavy aspect, it's actually one of the things that draws me to it
No if you can handle banking you’ll be fine. Isn’t rocket science. Recovery analysis, liquidity sensitivity, valuation waterfall etc.
strange that the industry adopted distressed PE as a term given it's an oxymoron
Just a little bit of equity still hanging in there… :)
unless you're at a big firm that can go across stressed/distressed, invest up/down the cap structure and truly control the LME process, distress investing in most cases is fighting with lawyers over why/how the smarter party screwed you over on docs, working on the 15th iteration of your model/recovery just so your MD/PM feels good about his junk investment that in reality is worth 0/better handed off to creditors, figuring out best of the worst businesses among junk stuff that should really be liquidated... only to slap on a PIK security on it to have paper gains until your investment is in trouble again since nobody wanted to touch it in a refi.
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