There’s one business on Wall Street where deal flow is at a fraction of what it was a few years ago.
It’s also the place where bankers and lawyers are in high demand right now.
Anticipating a wave of new business ahead, Wall Street firms are ramping up hiring for restructuring and bankruptcy specialists.
These advisers specialize in renegotiating debt, selling off assets to raise funds and structuring bailouts by new investors of companies that are struggling amid a recession or as borrowing costs rise.
Some big Wall Street banks have dedicated restructuring teams, while others have sector professionals who take on the role of advising distressed companies.
Some firms are teaming up: Investment bank Rothschild and oil and gas boutique Petrie Partners established a partnership to take on restructuring deals in the energy sector, Reuters reported November 23.
Deloitte, AlixPartners and FTI Consulting are among firms looking for new hires with experience in restructuring, according to job postings on LinkedIn. None of the firms responded to Business Insider’s requests for comment.
Law firms are loading up, too. Kirkland & Ellis is boosting hiring in the restructuring space, according to a person with knowledge of the matter. Kirkland already has about 100 restructuring professionals globally.
The energy sector, beset by a year-long slump in prices, is one obvious area where there could be restructurings, said Stephen Trauber, global head of energy for Citigroup’s investment banking team in Houston.
“These firms are busy, and will get busier,” he said.
Companies in distress are in constant negotiation with creditors to try and ensure that a business can survive. A key part of the advisers job is to try and avoid a bankruptcy.
“It’s not done in contemplation of more bankruptcies or defaults,” said Richard M. Jeanneret, Americas Vice Chair of Transaction Advisory Services at Ernst & Young, which is among those beefing up its restructuring team. “A lot of things can get worked out.”
Where there is a bankruptcy filing, the advisory mandates can drag on for years and provide big profits.
The bankruptcy of TXU — the energy company acquired by a group of private equity funds in the biggest-ever leveraged buyout — might generate as much as $500 million in fees, according to the Dallas Morning News. That’s almost twice what the buyout itself was worth to bankers, according to data from consulting firm Freeman & Co.
Dealogic broke down the value of deals, showing the lows in activity today and the highs experienced after the global financial crisis:
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