Banks, Law Firms Staffing Up Restructuring Teams
Amid cutbacks and recession woes, Wall Street firms are beefing up their restructuring teams. As the economy continues to slow, a number of experts anticipate a virtual flood of bankruptcies and restructurings in the coming months. Big investment banks are building their restructuring departments in a bid to provide financial advice and financing to companies in distress… and to earn fat fees along the way, according to The Deal.com. In fact, the report quotes Steve Smith, Head of Restructuring at UBS as saying, “Everybody is gearing up.”
According to The Deal.com, the following are among the big investment banks staffing up to join the Wall Street boutiques (Lazard, Blackstone Group, Rothschild and Miller Buckfire) in the restructuring advisory business:
- Morgan Stanley: Late last year hired Blake O’Dowd from Lazard to head the restructuring effort within its investment bank.
- Lehman Brothers: Back in May, set up an integrated restructuring and finance group - a joint venture between its investment bank and fixed-income units.
- UBS: Recently hired Matthew French, a restructuring partner at British law firm Lovells LLP, to head its restructuring group for Europe, the Middle East and Africa.
- Goldman Sachs: Recently opened a restructuring shop in Sydney
One reason for the restructuring push on Wall Street is the downturn in other investment banking businesses. The Deal.com quotes restructuring lawyer, Harvey Miller of Weil, Gotshal & Manges LLP, as saying, “When M&A and private equity go south or constrict, [investment banks] look for new revenue streams. Banks, always looking to bump up fees, are even hungrier now. Though the economic forecast is gloomy, giving financial advice to companies in distress can generate fees.”
According to The Deal.com, many large firms are now carving out advisory roles that focus on providing capital solutions to distressed companies before they file for bankruptcy, resulting in a scramble for talent. Executive search firm, A.E. Feldman, says restructuring bankers are hot commodities. Candidates with expertise in distressed advisory work, in particular, are in growing demand.
Law Firms Eye Restructuring Work
Right now, top law firms are betting that bankruptcy and restructuring work will be their most promising avenue of growth. As a result, A.E. Feldman says legal jobs are opening up as firms accelerate the recruitment of bankruptcy attorneys and restructuring specialists.
Legal fees are already going up, according to Bloomberg. The report states the peak so far is $975 an hour, citing court filings. That’s one-third higher than the $700 high point during Enron’s restructuring. Chicago firm, Kirkland & Ellis, is handling six of the 12 largest U.S. bankruptcies by debt. That includes the $2.43 billion restructuring of casino operator Tropicana Entertainment LLC. Bloomberg quotes Joseph Doherty, Director of the Empirical Research Group at the University of California at Los Angeles Law School, as saying, the firm stands to make about $70 million on the six cases, based on the companies’ reported assets and previous fees. Bloomberg notes that’s 5.3% of the firm’s 2007 revenue as reported by the American Lawyer.
Complicating matters, however, restructuring professionals say increasingly complex capital structures and a larger number of stakeholders will make struggling business more difficult to save if the economy continues to worsen, according to Dow Jones Private Equity News. The report states that private equity execs expect increased litigation, harder negotiations, and longer recovery times for struggling portfolio companies in the coming years – a trend that will place even more pressure on legal teams.
To learn more or inquire about job trends in restructuring or bankruptcy the lines of communication are open. Contact the Mitch Feldman, President of A.E. Feldman, and the firm’s cutting edge financial or legal recruiting teams here.
