Restructuring investment banking, often abbreviated as RX, is a specialized area within investment banking that focuses on advising distressed companies. Companies may become distressed due to excessive debt, declining sales, rising costs, changes in regulations, lawsuits, management issues, or broader economic factors.
Restructuring bankers work with companies, creditors, shareholders, and other stakeholders to improve a company’s financial position and avoid scenarios like bankruptcy or liquidation. This can involve developing comprehensive turnaround or reorganization plans, raising new financing, selling off assets or business units, negotiating with creditors, and facilitating mergers, acquisitions, or divestitures.
As restructuring situations tend to be complex, high-stakes, and fast-paced, restructuring banking requires sharp analytical skills, strong financial modeling capabilities, legal and accounting knowledge, negotiating prowess, and the ability to think creatively under pressure. Top restructuring banks include Houlihan Lokey, PJT Partners, Lazard, Evercore, and Moelis & Company. Competition to break into restructuring investment banking is fierce given the intellectual challenges, high compensation, and recession-resistant nature of the work.
Restructuring investment banking professionals help distressed companies improve their financial positions
The primary role of restructuring bankers is to work with companies facing financial distress and guide them through the process of reorganizing their businesses to restore financial stability. This often starts with diagnosing the root causes of distress through in-depth analysis of the company’s financial statements, operating model, industry dynamics, and management team.
Next, restructuring bankers develop comprehensive turnaround plans that identify options for raising cash, cutting costs, divesting non-core assets, negotiating with creditors, attracting investors, and making operational improvements. They build detailed financial models to assess the impact of different restructuring scenarios and ensure all stakeholders get a fair outcome.
Throughout the process, restructuring professionals engage closely with company executives, creditors, shareholders, lawyers, accountants, insolvency practitioners, and other advisors to bring negotiations to a successful conclusion while limiting disruptions to ongoing business operations.
Top restructuring investment banks dominate the market
The restructuring investment banking market is dominated by a handful of elite boutique firms who have cultivated strong reputations over many years of handling complex, high-profile deals. The top restructuring shops include:
Houlihan Lokey – The gold standard in restructuring with over 200 dedicated restructuring bankers globally. They’ve advised on over 1,000 restructurings, including 5 of the largest ever deals like Lehman Brothers, Washington Mutual, and GM.
PJT Partners – Spun out from Blackstone’s M&A advisory group, they are considered the preferred advisor for many alternative investment firms. 50 Managing Directors focus exclusively on restructuring.
Lazard – A restructuring powerhouse, they’ve advised on mega deals like Enron, WorldCom, the biggest municipal bankruptcy ever in Detroit, and the aftermath of the global financial crisis.
Evercore – Expanding rapidly, they now have one of the largest restructuring practices on Wall Street with Managing Directors averaging 20+ years of experience each.
Restructuring offers diverse exit opportunities and recession resilience
Beyond the intellectual challenges and high compensation, working in restructuring investment banking provides unique advantages in terms of exit opportunities and recession resilience.
Given their involvement across capital structure issues, operational restructuring, distressed M&A, and complex negotiations, restructuring bankers develop a multifaceted skillset valued by hedge funds, private equity firms, management consulting firms, Fortune 500 companies, and elite business schools.
Additionally, while M&A and capital markets teams contract heavily during market downturns, activity picks up significantly on the restructuring side during recessions as overleveraged companies fight for survival. Thus, restructuring offers greater job stability during periods of economic volatility.
Breaking into restructuring banking is very competitive but doable for motivated candidates
With its complex work, lucrative pay, and resilience to downturns, it’s no surprise competition is fierce to break into restructuring investment banking. Bulge bracket banks, elite boutiques, and middle-market firms all seek targets from Ivy League schools, top MBAs, accountants, consultants, lawyers, and distressed credit investors.
However, while difficult, it’s not impossible for motivated candidates from non-target backgrounds. Restructuring teams value real-world experience and individuals who demonstrate interest in distressed situations. Relevant experience could include internships involving business analysis, financial modeling, turnarounds, workouts, bankruptcy, or reorganizations.
Candidates should thoroughly research firms, leverage personal connections, highlight transferable skills, and communicate a passion for the space. While challenging, with proper preparation and persistence, talented individuals can still craft rewarding careers in this dynamic niche of investment banking.
In summary, restructuring investment banking involves advising distressed companies and their stakeholders through complex turnarounds and reorganizations to restore financial viability. Elite boutique banks dominate the market given the specialized nature of the work. Restructuring offers intellectual rigor, high pay, diverse exit options, and recession resilience, making it a highly coveted area within investment banking.