M&A or Restructuring for Investment Banking to Hedge Funds

Where to start.

Okay, first off, people are slamming on you in this thread because you come across very negatively. It's entirely fine to have an idea of your career interests (everyone here does), put some effort into identifying trends (everyone smart should), and proactively plan your present actions for where you'd like to be in the future.

What generally isn't acceptable in this industry (or many other places), however, is shamelessly advertising that fact. Lil Wayne's lyric applies here: "Real G's move in silence like lasagna." Be smart about what you're doing, don't present this blasé, nonchalant attitude that makes people think you're some naive, starry-eyed kid who has no real passion and only wants to be where the money is today.

Secondly, to answer your question ... there will always be opportunities in distressed investing. Companies get mismanaged, products underperform, litigation happens, markets change ... all of this occurs regardless of the point in the economic cycle. That is why restructuring advisory practices exist and why special situations/event driven investing evolved.

In recent years, yes, we've seen a number of high profile bankruptcies and restructurings in developed markets. The credit crisis has presented numerous opportunities for savvy investors across asset classes (think: Apollo flexing its mandate to invest in the debt of its portfolio companies and gain outsized returns, Paulson and his MBS success, Tepper crushing it consistently to the tune of billions in the past four years at Appaloosa, etc.). While the recent crisis has been a bit of an anomaly, it certainly won't be the last. Think of the scene from Margin Call (1:59 mark if the code fails):

//www.youtube.com/embed/L5gZrgGXOco

So, knowing that there will always opportunities to practice this "distressed expertise," as you term it, how do you prepare yourself in banking for such a role on the buy-side? The answer is a little murky, but there are a few certainties.

For one, you're best off in a product group. Why? Two reasons. First, you're most likely to get positive attention come recruiting season, and second, the transaction experience you get coming out of an M&A, Restructuring, or Lev Fin group is a far better training ground than most coverage groups can offer (pitching, client service, IPOs, capital raises, etc.).

Yes, GS FIG/TMT/CRG/whatever is an exception to the first point. Why? Because there are no product groups at the firm, so headhunters come looking for the guys with (guess what ... ?) the best transaction experience. Historically at GS, that's been TMT and FIG.

Secondly, you probably want to go to one of the 'elite boutiques,' as they're known on this site, or the independent advisory firms as they're growing to be known. Blackstone, Moelis, Lazard, and Evercore don't have industry groups (Lazard is kind of an exception).

At the analyst level they differ in terms of letting analysts touch both (i.e. last I heard, Evercore used to have analysts do both but now splits restructuring off separately, Moelis and Lazard are generalist for the first six months and then silo you, and Blackstone M&A and R&R are two very distinct practices and recruit separately), but these firms are alike in that they offer independent advisory in mergers and restructuring. They have industry verticals, but it's purely a specialization within the product. I said Lazard is an exception because I'm hearing about them doing more client service-y type stuff and no longer solely advisory. If anyone can confirm, would be helpful.

Thirdly, your placement (M&A vs. restructuring) as an analyst at one of these shops won't immensely predicate your buy-side exit. At Blackstone, for instance, the exits between the two groups are literally identical. The R&R guys have a great profile for the distressed shops, but you'll see them place all over PE with frequency, both MF and MM. The ones that take the HF route aren't exclusively credit. I know guys from the group at Lindsay Goldberg, FFL, Bregal, Farallon, Glenview, Visium ... point is, placement is very diverse. The M&A guys place just the same, very varied: Warburg, Apollo, Centerbridge, TA, PointState, Corvex, etc. (and that's just off the top of my head).

So in summary, get to a product group, ideally at a top boutique. If you're at a bulge bracket, make sure you get into M&A or Lev Fin. Get the transaction experience and develop your financial skill-set, be proactive to prepare yourself for the buy-side from day one, and initiate relationships with headhunters early.

Also, work on how you present yourself both in person and online, and put some more effort into finding all of this out on your own (alumni, informational interviews, research, etc.). Good luck.