Restructuring IB vs Consulting
Can someone please explain to me the difference between RX IB (Houlihan, PJT, Rothschild, Evercore) and RX Consulting (A&M, FTI, AlixPartners)?I'm aware of the differences between debtor and creditor advisory. More so trying to figure out what roles these two play in a bankruptcy, day to day work, exit ops, comp, etc.I am told that for someone who wishes to work in RX long-term, consulting might be the way to go (especially FTI). Any truth in this?
Bump
RX banking raises capital and does a sale process if these options are chosen. Rx consultants focus on operational improvements and create detailed projections (usually consultants do most of the projections and bankers select a discount rate for valuation). Both of the roles overlap quite a bit: both often compete directly for creditor engagements, analyze the capital structure, evaluate strategic options, etc.
A&M and Alix are considered the two best firms in rx consulting; FTI is third. As for consulting or banking, you have to determine which one you like better? Consulting has better hours with lower pay.
Thank you for your clarification.
It seems to me then, that RX banking is basically a distressed M&A role. Why is it that bankers are paid more, and are likely to exit into PE or HF roles, when the consultants are doing most of the “important” work - actually turning around the business? How significant is the pay gap anyway?
Also, why the MS? I thought your answer was pretty straightforward. Perhaps it’s the firm rankings?
RX is much better characterized as liability management than distressed M&A. Yeah, there are distressed M&A deals that you could work on, but those are the exception rather than the rule. As opposed to the consultants, the bankers are going to be focused on exchanges, negotiations regarding extensions/covenant modifications/waivers w/ existing lenders, refinancings, and in the context of an in-court process, the economic terms of the plan (DIP, exit financing, consideration to prepetition creditors, rights-offerings & backstops, MIPs, equity tips to out-of-the money creditors, etc.). This is why buy-side exit opps are much better for bankers as opposed to consultants.
Here’s the best way to think about it.
Turnaround Consultants are asset focused (left side of the balance sheet)
Rx bankers are liability focused (right side of the balance sheet)
There isn’t a hard rule that says consultants can’t advise on liabilities, or bankers can’t advise on operational improvements (the assets), it’s just usually how things play out
That said, for creditor engagements, I have no clue what the consultants do. Maybe in that scenario they do directly compete with bankers for the same mandates
Thanks - that makes sense.
Consultants on the creditor side basically review the debtors plan of reorganization, challenge valuations and DIP financing term, look for other sources of returns that could potentially maximize creditor recoveries (fraudulent payment, preferential treatment 90 days prior to the bankruptcy, etc) and represent unsecured creditor committees who individually would not hire their own counsel/ FA’s. I am likely missing a few other things, but this seems to be the gist of it.
What are exits for an analyst at AM or alix? Can they go to distressed HF or PE or anything , or is that a stretch. I imagine chief turnaround officer or some shot like that or being a cfo ? Etc.
What’s the best exists y’all have seen. Curious , I think I considered this path for a few weeks in UG (lol) and curious
From people I talked to, they told me rx consulting to a deal team is pretty challenging without rx banking experience. I think operational roles at distressed PE shops are pretty doable though.
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