Rx investment banking, also known as restructuring investment banking, is one of the most sought-after groups in investment banking. With the downturn of the economy in 2022, many companies are facing distress and bankruptcy. This has created huge demand for restructuring and bankruptcy advisory services. As a result, rx investment banking groups at top boutique investment banks such as PJT Partners, Houlihan Lokey, and Lazard have become the hottest destinations for top graduates from elite schools. In this article, we will explore why rx investment banking is so attractive and valuable, the work bankers do, and how students can break in.
Restructuring deals are sexier and involve higher stakes
Restructuring investment bankers deal with ‘special situations’ and ‘distressed’ companies facing default or bankruptcy. Therefore, the deals involve much higher stakes compared to regular M&A and financing deals. While regular investment banking work can become repetitive, every restructuring case is unique given the complexities of each company’s financial troubles. This makes the work more intellectually stimulating. In addition, rx bankers work with top hedge funds and private equity firms specialized in distressed assets. Such elite firms are highly sought after exit opportunities, which makes rx investment banking a fast track to buying side jobs.
Higher pay than other investment banking groups
According to industry insiders on WSO, rx investment bankers are often paid more than M&A bankers at the same level. Although the deal sizes tend to be smaller, the fee percentages are much higher on restructuring deals. Houlihan Lokey, the top restructuring advisor, has 200+ dedicated rx bankers globally. They have advised on 12 out of the 15 largest bankruptcy filings. While regular M&A deals typically command 1-2% fees, bankruptcy and restructuring fees can be as high as 5% of the distressed company’s debt. Therefore, the pay in rx investment banking tends to exceed groups like M&A and industry coverage.
More technical skills required attracts top talent
Unlike other investment banking groups focused more on client relationships and pitch books, restructuring work is highly technical. Rx bankers need to analyze complex capital structures with many kinds of debt. They model how companies can rebalance their debt loads to avoid bankruptcy through debt exchanges, amendments, and refinancing. The heavy technical nature of the work is appealing to top graduates from programs like Wharton looking to build hard skills. Being able to handle the complexity is also a barrier to entry for rx investment banking.
Top boutique investment banks dominate restructuring advisory
While bulge bracket banks have strong restructuring practices, they sometimes face conflicts of interest due to their lending relationships. Boutique banks without lending businesses dominate in pure restructuring advisory. According to industry surveys, the top restructuring advisors include PJT Partners, Houlihan Lokey, Lazard, Evercore, Moelis, and Perella Weinberg. These elite boutiques offer the best training and highest quality work in rx investment banking. However, they tend to be more selective than bigger banks in hiring. Candidates need to showcase their technical abilities and intellectual horsepower during the recruiting process.
In conclusion, rx investment banking groups are coveted destinations for top talent due to the high stakes deals, superior pay, specialist technical skills, and attractive exit opportunities. Students interested in bankruptcy and distressed M&A advisory should target the top restructuring boutiques.