Can anyone discuss the key differences with regards to exit opps, career outlook, comp, lifestyle/wlb, intensity and types of modeling and anything else anyone can think of?
Is RX more cyclical? Is it the same as bankruptcy and turnaround deals? Are turnarounds more operationally focused while RX is just concerned with capital structure?
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Career outlook: Great experience and looked at favorably upon recruiting. Many of my colleagues have had many opportunities to move to buyside at various levels (I've seen VP get offers) and mandates (basically anything except growth and VC for the obvious reasons). Echoing what others have said on this forum, RX will be busy for the next 3-5 years, but given the capital market liquidity and yield hunger, we don't know when things will implode. Default rates are still low with little signs of picking up and the liquidity is leading many private credit players to refi out the banks instead of pushing a company into default so you're seeing lots of people fight for the same deals in the space.
Comp: Can't commitment on it broadly since it looks like everywhere is changing. 2020 was a good year for RX and friends made 15-20% above street (note this was before "street" starting rising).
WLB/Lifestyle: You don't go to RX for the lifestyle. Every situation/deal is different and usually the timelines aren't arbitrary, they HAVE to get done (for obvious reasons) so it leads to a lot of sweat on every deal. You're also dealing with a lot more parties than normal M&A process so it's a lot more juggling. Also, RX teams tend to be lean by nature, just look at your bank's workout team (I know, not the same work) for reference.
Modeling: Not more complicated than M&A in terms of technicality, just in terms of focus. A lot of the times, there are no set templates for a company going through bankruptcy. You'll also be looking at the cap structure more heavily. Most of the times though you're digging in credit docs.
RX work does pick up with the cycle, but as you've seen with the economy transitioning into 2021, it's also about the FED now. More liquidity and hunger for yield = private credit refis when a company should normally go into default. Though there are always companies going out of business just because times are changing, those are the deals firms are fighting for now. Restructuring is the result of a turnaround or bankruptcy. Turnarounds tend to be more associated with the operations. Most of the time you'll see RX firms have a mandate for M&A or capital advisory along with RX.
@DrHFmonkey said it very well. Only comments I'll add are that turnarounds ARE a form of restructuring. I understand that turnaround and restructuring often get confused in their meaning, but turnaround consultants come in and restructure a company's operations. Capital restructuring involves altering the capital structure, typically right-sizing the debt stack to be in line with industry norms and in an amount that is feasible for the company to service its debt on a go-forward basis. It could also come in the form of refinancing debt terms with a new or existing lender, comprise a debt-to-equity conversion, etc.
As said above, my firm is typically engaged to perform both the operational and capital restructuring of a client, as well as a mix of concurrently representing the client as the investment banker.
How does a creditor vs. debtor engagement work from an analyst's perspective? Is it much of the same work across the RX engagements, or are there typically different responsibilities?
It really depends on the nature of the engagement. Debtor-side representation is the side that you want to be working on for most engagements (highest paying fees). For Creditor-side representation, the work deviates in that you are reviewing the work of the Debtor and the schedules/analyses provided by the Debtor's FA. You may be focused more so on identifying avoidance actions and trying to take the stance of maximizing the creditor's recoverability of its claim. Debtor-side is focused on the full reorganization process and putting together all the schedules required and the 13-week cash flow model, for instance.
What's the workout team?
Limited experience in RX but I'd offer the following:
- RX is less competitive, and therefore usually more lucrative, than M&A. There are just way, way fewer people and banks doing RX than there are people and banks doing M&A. Obviously the volume of business is different also, but I think supply & demand are more favorable in RX
- RX exit options are probably fewer (mostly focused around distressed debt investing) but the need to exit is probably less acute. The ratio of senior:junior RX bankers is, anecdotally, much lower than is the ratio of senior:junior M&A bankers. Both are up-or-out but I think RX has more room if you want to go up.
- RX is a little more unpleasant in that it is always a fight about who loses the least amount of money. There aren't going to be congratulatory emails, closing dinners, etc. when a bankruptcy plan gets finalized.
you mean RX is more competitive?
No, less competitive as in there are only a few firms that would likely be tapped to be a restructuring financial advisor for a situation with over ~$100m in debt. In a pitch setting it’s going to be like PJT/LAZ/MOE etc against each other every time whereas in m&a you could have any BB/EB/other firm trying to get in the mix
RX does closing events / dinners / deal toys and congratulatory emails
Ok, I stand corrected. I guess there are occasionally "winners" in a restructuring / reorg, but still, those are not transactions that all parties enter into willingly or ever would have wanted. Vs. M&A where, usually, a seller sheds a non-strategic asset and reaps valuable capital that it can invest elsewhere, or a founding mgmt team gets rich, or a buyer acquires a business they're excited about, etc.
Bump
Would RX to corp dev be possible? Harder but still gets looks?
Bump, also curious
Have people at my firm (analysts to VP's) that have left for corp dev. Some have also came from corp dev roles.
How does RX comp differ from M&A at the junior levels? (An1-Associate)
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