Wharton kids favor restructuring/distressed investing?
I was talking to a few friends who are currently there and learned most of the top kids (current junior/senior) are going to restructuring shops (whether it be PJT Rx, Millstein, Houlihan Lokey Rx, Evercore Rx, Moelis...) or distressed funds. Of course, you have a few at silver lake and such but overall that seems to be the trend. If you look at the profiles of the kids running Wharton's main investment club or search for the people who participate and win pitch competitions you also find a similar trend. You also see people leaving GS/MS/JPM for these restructuring groups. Is there a reason why Wharton kids like restructuring/distressed so much?
You can't deny that it's cool to rebuild companies financially, but can't speak for them specifically
Admit it, "special situations" "distressed" "turnaround" "opportunities" sound much sexier compared to mezzanine and advisory
Likely part of the draw is that these groups are smaller which in turn makes them more “exclusive” / prestigious. Another point to consider is that restructuring is very technical whereas a coverage group at a BB might be a greater mix of qualitative and quantitative work. Given the background developed at Wharton, top students would likely have more interest in the technical aspects
Would be really interesting to know if someone from Wharton could comment. I have also considered restructuring personally due to the rising rate environment and there has to be some sort of drawdown in the next 3 years. I'm not from the US, however.
Does anyone know if traditional PE (not turnarounds) is an option after RX?
Speaking from firsthand knowledge of placement in my group, yes, it is, including megafunds. That said, it's obviously much less common (because it's much less sought after) than distressed / special sits / credit buyside opportunities.
If I were to venture my guess, it might be because:
Working with companies in distressed situations is interesting to say the least, since they face risks of defaults, bankruptcy, job loss and business disruption / existential crises. Stakes are infinitely higher here than in traditional M&A.
Whereas some M&A deals can be executed without bankers (I have seen it before), I doubt anyone would want to go forward with filing for bankruptcies without hiring a financial advisor. Opens up to litigation and negligence suit against management to say the least (corp dev team can only do M&A and should only do M&A).
Restructuring allows you to work in M&A and capital markets advisory as well (i.e. distressed sale, capital raisings can be pretty common) so the skills can be applied and transferred successfully. M&A bankers usually don't do RX mandates but RX bankers work on M&A and cap transactions a lot.
This one is pretty theoretical and economic-theory related but your job security and comp is very high and stable against market condition. Take a stock that is not correlated or negatively correlated with the market. Investors are willing to pay more for that diversification. Working in restructuring can be thought of as that asset, secured in downturn yet generate higher payoff (RX analysts get paid top of the street). And it's not like in upswing cycle they do nothing either.
Overall, I think it's a lot more of a generalist experience than people think, with the added bonus of higher comp, security, prestige and exclusivity that attracts a lot of people.
I personally work in M&A but am intrigued by the RX practice as well, have been doing a lot of research and thinking to see whether a move or brief rotation into that team would be feasible and beneficial for professional development.
Your point about job security during a downtime is actually pretty valid and something I forgot about until now. I have heard many people say it is a great point for going into restructuring. It's actually more beneficial during a downtime as there is more work to go around though some companies are always going to be in trouble no matter the economic conditions.
I've done a ton of restructuring work and for me the reason is 3 above. If you work on a successful restructuring, you get access to capital raising (bank debt - DIP financing pre filing, ABL financing /RCF on exit; capital markets), understanding security / capital structure, M&A processes through 363, legal process, etc.
You also get access to an insane number of professionals as everyone and their mother is represented in insolvency situations.
The flip side is, when you spend years working on a file that's under creditor protection and it ultimately goes bust, you can be quite demoralized.
Question for you! Would a BB or MM rotational program graduate be of interest to an RX team (6 month rotations in ER, ECM, IG Credit Trading and M&A IBD) after completing a top MBA? Would make sense to me since you would have had experience in many of the fields you mentioned.
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I think it's also because their school's investment fund has special situations and tactical opps teams, so naturally they learn about this industry early on and develop an interest once they realize it's much more interesting + the opportunities available. As someone coming from a non-target, VERY few to no students even know about restructuring/distressed investing.
I could only dream of going to Wharton, but I’ve always found distressed debt / RX / turnaround consulting much more interesting than IB. Personally, I think you’d get a much better sense of how to run a business but I’m just guessing.
I couldn’t deal with IB hours and now work in CB, but I have the opportunity to do some work for our Asset Recovery / Special Assets, and it is very interesting getting decks from turn around consultants and how the Bank plans to exit the deal or remain in it with new stipulations etc.
Turnaround consulting is the absolute worst. They get paid half what the bankers do, work nearly the same hours, and end up doing nothing but building liquidation analyses, putting together the monthly operating reports required by bankruptcy courts, and tracking asset sales in liquidations. And they have to travel to all the crappy cities in the country (unless you're lucky and get a media deal in LA or a retailer in NYC) and be on-site with half competent management teams. Not quite as cool as it sounds.
thanks for the color, looks like I won't attempt to go into turnaround consulting lol
This is pretty representative of my experience as well. Wasn't the most fulfilling role I've ever had.
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Hello current Wharton senior here (not going to RX but have plenty of friends going to the shops you mentioned). I would generally agree that there's a trend where Rx shops are garnering more interest but let me qualify this with a couple of things:
The absolute top-tier of Wharton (top 5%) usually go the top buyside programs (Silverlake, BainCap, Ares, Bx), PJT-Rx, or on the rare occasion where there's an absolute superstar, a HF like Silverpoint or Samlyn. By top-tier I not only mean Summa cum laude/Beta Gamma Sigma/ academic achievement, but also someone who dominates the prominent investing competitions such as Silverlakes LBO competition, Silverpoint's Special Sits, Farallon or Samlyn. Furthermore, these students usually have some leadership positions in the most competitive Wharton clubs (WITG, Penn Investment Alliance) or in competitive inter-collegiate programs like Global Platinum Securities.
The rest of the competitive Wharton students who are still solid academically (think 3.7+ GPA), usually fill the other BB/EB M&A and RX positions. It's not uncommon to see these students recruit for both M&A and RX positions during OCR, usually since they want to keep their options open and apply to as many places as possible since OCR is so competitive. For example, I know a kid who was deep in the process for Centerview and ended up accepting an offer with Millstein. Another friend of mine had superdays with Greenhill and Houlihan Rx. I think it's rare to find a student in this pool who solely fixated on Rx during recruiting.
I believe the trend of more students interested in Rx is actually a subset of a larger trend: In general, I've noticed Wharton students are favoring EBs more than BBs, for a variety of reasons that have been discussed at length in these forums in EB vs. BB threads.
This was very informative. Are the top buyside programs open to students through OCR? Or do they get those through networking/connections?
I think this is all generally very accurate. The big reasons people like distress are that it's interesting, it's safe, and it leaves very versatile and lucrative exit opps.
In regards to the the top 5%, I would actually say the top students probably prioritize it as SPC, SLP (if you want PE), then PJT or EVR. The Tier II buyside options have fallen out of favor in recent years to a certain extent, but are obviously still very sought after.
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Recent Penn alum here and I find this very accurate. These top buyside options are practically only available to Wharton and Harvard undergrads and you need to be at the tippy top tier of the class (3.9+ GPA, tippy top leadership positions, competition distinctions etc). Knew a few kids my year and the year above me who got KKR, TPG, Bx, Apollo and Silverpoint straight out of undergrad and they were absolute beasts.
Correct from my experience at Harvard except Apollo and TPG don't recruit anymore unless you've got the hookups. We also get different hedge funds started by alumni coming here and taking top kids, while friends at W tell me they get similar but mainly with a PE slant.
Don't know anything about these firms and I go to Princeton lol. Everyone here goes to quant shops like Two Sigma/Shaw and some of the prop places (Five Rings/Jane Street)
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There are a ton of summa cum laude wharton kids (many in jerome fisher m&t) in GS classic and MS m&a/menlo tech, which kind of contradicts the top 5% comment.
Have you seen the Penn Investment Alliance people though? I would hardly value a leadership position in that club.
Would be curious if this is a Wharton-only trend or is a trend in most upper tier targets? I wonder if the top tier Harvard kids are also going to restructuring?
I go to Harvard and have friends at W, and I get the feeling the trend is more pronounced at W, if only because kids there feel they have a better grasp of finance (I don't believe that's true but it's their perspective). Here my view is a lot of kids are either going into traditional M&A banking or straight to buyside if they can get it.
How does MBB rank at H compared to M&A or PE?
As someone in London with no connection to either Harvard or Wharton, I personally believe that Wharton students really have the best placement in finance. Quite similar to sort of EB vs BB argument actually: Harvard is a more recognised name globally but within finance circle, Wharton still trumps them (at least in undergrad, not discussing MBAs here). Similarly with LSE vs Oxbridge in the UK.
Probably more self-selection than anything else, where students there are very focused on a specific career path and know what they want very early on. Top firms like Silver Lake hire almost exclusively from them for entry level.
I think one thing to consider is the amount of complex, technical exposure you gain so early on when you go into RX/special situations/tactical opportunities/distressed investing.
As a 23-26 year old, you have a really nice window to absorb so much knowledge through these complicated transactions and investments that it really sets up how you view the world and how you view businesses for the rest of your career.
I think once you get older, it's a bit harder to grasp the complexities, especially when you're coming from a more traditional background. People will argue that it's easier to learn qualitative aspects, which I generally agree with.
I feel like an implicit reason why people who don't have an undergraduate business background like engineers go to business school for an MBA is to learn to be more professional. There are so many engineers who don't know how to dress or act professionally within a business, but going to a business school teaches you and exposes you to professional behavior through campus recruiting events or business presentations.
True. Went straight into distressed from undergrad...it is amazing how useful of a framework it is to think of investing situations in terms of how each transaction is/was structured, how the org chart flows (which I think is most important), what the covenants are, etc...essentially what the "deal" behind each company is and how can you position yourself to benefit from it.
Agreed with many of the points above. Rx also often leads to distressed buyside exits, especially if you're coming from the top Rx groups: Lazard, PJT, HL, Moelis
Not much love for Millstein, which is more in the Jefferies, GLC, and Miller Buckfire tier
Would generally agree but would say Evercore should be in your top groups and Millstein is definitely a up-and-comer vs MB/GLC.
H is a good school but W is a good school too. I’d say H students have a better shot at getting restructuring jobs, becuase it’s harvard. W kids are in a good spot too cause W focuses on finance
I've heard from friends that of the incoming SA classes to both PJT and EVR, there are more W kids in restructuring, but more H kids in M&A. To me seems like H kids recruit well generally but W kids are dominating recruiting for restructuring rolls.
Another misconception is that people may think RX kinda pigeonholes you into doing distressed PE or HF later on (admittedly, I thought so as well during my undergrad recruitment process).
Talked to a few headhunters in London lately and apparently they like the RX background for MF MM normal PE as well. So i guess exit opp from RX is broader.
I'm a Wharton alum from within the past 3 years - I went straight to one of the credit buyside firms (think GSO, KKR Credit, BainCap Credit, Silverpoint, Ares credit, etc). From my class, the top students went to firms like the above, as well as Warburg, GS SSG, Bx PE, Silver Lake, etc. Most of these did either OCR or unofficial OCR. The Rx shops trend is a bit more recent (last year or two), not sure why that's happening, though I'm sure exit opps are excellent. My class clearly preferred going straight to buyside - exit opps are strong, and the work is extremely interesting.
While I agree with most of the comments saying that top folks are going direct to HFs or Rx shops, I'd say the "top" tier is looser definition than is being suggested. The HFs are way more focused on prior internships, taking tough classes, and being truly interested in investing. Yes, one way to get internships is through top grades, or to show an interest in investing is to participate in the investment clubs, but my point is that those are not the only way. I know this well given I was OCR for us and are definitely attainable if you can demonstrate the three items I mentioned, which can be demonstrated in a number of ways. The only true cut-off I'd say (now that I'm on the other side recruiting Wharton kids to the HF I work at) is around a 3.5 cumulative GPA but nothing less than a B+ (maybe B) in the core finance and accounting classes.
Would you view Harvard kids in a better light than Wharton students?
We generally split up recruiting by Alma mater, so I’m not really ever reviewing harvard student resumes. I wouldn’t really put a ton of weight/preference for any specific school amongst the targets.
It varies even within the same firm, "fit" is one of the largest parts, assume they all have pretty strong technicals and internships already.
How do you view students from complete non-targets?
CreditInvestor
Folks from non-targets would have to find a way to get their resume read (reach out directly to someone) as opposed to the targets where there is a job posting to respond to. That said, we generally would look at a resume from a low-ranked school if the student makes up for it with really excellent internships. A first round screening call with an analyst is relatively low cost anyway.
What are some typical exit opps from where you work?
Pretty wide. Most people stay on as to be Associates (and a lot stay on after that to VP and higher), but analysts/associates that don’t stay have gone primarily to other HFs (usually because they either wanted a sector-focused fund or because they wanted a different asset class). A few have gone to megacap PE, can’t think of any going to MM PE in recent years. A couple family offices also. And then a fair amount choose to go to biz school, though it’s not really required to move up here.
I assumed the thread was discussing this trend as a leading indicator - students anticipate more job-security in Rx over the next 5 years for fear of pending recession and being caught short like the class of 2008.
Also on employers' side - they may be increasing hiring in anticipation of a recession.
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Just wondering how people would choose between top shop M&A and top shop Rx (Moelis, Evercore, Lazard, etc)? Which has better exit opps, and which is better for PE? Thanks
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