Transitioning into restructuring big law with no legal experience Forum

[Anonymous User]

Worried about a potential great depression level financial crisis and want to know if (and how) restructuring big law (Kirkland / Weil etc.) might be possible for someone with my background / experience (should the time come).

I am a junior VP at GS/MS in an industry coverage group in London (transferred here after working in NY in the same group ~3 years ago). Was KJD but took this job after graduating from HYS. FWIW, I passed the NY bar and summered at a V5 back in law school. Generally really enjoy my job (despite the hours) and have no regret passing big law for banking.

However, capital market activities have cooled significantly in 2022, with the exception of a few M&A, our debt and equity products are not getting nearly the same level of traction compared to 2021 or even 2H 2020. With all the other seemingly unending macro headwinds, I feel very uneasy about global economy / financial markets in the next 2 years.

Not sure how many of you remember 2008, but banks were much more brutal downsizing (Latham was an angel compared to some of the bulge brackets). I am unfortunately reaching the level most vulnerable to shocks (high-cost senior execution bankers are usually the first to go if there is another great recession). Thus, wanted get the collective TLS wisdom on whether it would be possible (and how) to reposition as a restructuring lawyer and potentially lateral to Kirkland / Weil etc. if GFC strikes in the next 12 months - assuming that I can get all the licensing issues cleared and am also willing to take some class year cuts. FWIW, I have worked on various restructuring / special situation mandates at my bank and am fairly friendly with a number of restructuring partners at WLRK, DPW and Kirkland who were on our deals. The main purpose of this question is to plan for fallback option(s) in order to minimize risk of default (unfortunately levered up a bit too much for real estate when the market dipped in 2020).

[mr_toad]

Not a direct answer but why not consider staying business side but transition to a shop that does lots of this kind (distressed/restructuring) of work like Evercore, FTI or A&M to name a few? Seems like a more natural progression than going to the legal side. Other places could include the obvious big names like KKR but also Oaktree, Ares and similar places that are more buy side than the advisory shops I mentioned. Feel free to Pm.

[Anonymous User]

Two thoughts

(1) The US/global economy sustained the biggest economic/financial shock in like, 50 years in March 2020. That led to less than a year of booming RX work. People always talk about RX being "cyclical," but we just had our RX cycle and it lasted what, 9 months, not 5 years. It is...not busy right now. This isn't at all to say that oh, new normal, there will never be recessions. But not sure they're going to correlate with widespread, sustained boom-times in RX work.

Talk with some folks in distressed debt right now. They're pretty fucking negative on the space. Niche + highly cyclical + cycles seem shorter and shorter. Funds raised a ton and now they're all picking over the same set of 50-100 names.

All this to say---our theoretical GFC could hit, you could make your way over to Weil, do some RX work for a hot minute, and then be posting this same thread in TLS a year from now asking how to get back to your VP job by January 2024.

See, e.g.: https://www.wsj.com/articles/top-bankru ... 1623962752

(2) Putting (1) aside, though - wouldn't it be much, much easier to go to RX IBD? I don't think what you're proposing is literally impossible, but most law firms aren't looking to hire lateral JDs who've never practiced law in the middle of a recession (which is when you're proposing to come). You're not even in a bankruptcy practice group. You're in industry coverage.

Now, a finance background is very, very helpful in transactional law (I have one myself), but it's not a substitute for actual practice experience. You're going to be functionally a first year associate, even assuming they give you a year or two of credit.

[Anonymous User]

Avoid K&E Rx. That’s a declining group full of old ideas.

[Anonymous User]

With all due respect, transitioning from an IB role that you like at the VP level to a big law Rx associate makes no sense.

First, as an above poster mentioned, the Rx market sucks right now. I am at a firm w/ a major Rx practice and people are slow af. Lots of associates are not staffed on any active matters or have one at most. I haven't billed a week over 50 hours in 6 months. Everyone's hoping that things turn around but it's not fun right now, and the exit options that people in Rx dream of (e.g., distressed funds) aren't doing well either. Not to say that Rx is a bad area to be in, but now is not a great time to get in. However slow you feel this year, I assure you that almost all big law Rx attorneys are slower.

Second, you'd almost definitely take a huge pay cut. With your bonus I am sure you are making much more than the equivalent seniority at a firm, assuming you could even lateral in at an appropriate level of seniority. Law practice is something that you learn by doing and I think it would be hard for a firm to justify bringing you in as a mid-level if you haven't spent years doing the things that lawyers are expected to do day-to-day.

Third, I think it's unlikely that you'd prefer transactional legal work substantively to deal work on the business side. I think Rx is the best transactional practice, but there's a reason why people try to go from law into finance and not the other way around.

Unless you really think you missed your calling and want to start over as an Rx lawyer, I would not recommend making this transition. If you really want to be in Rx I would look at Rx banking (though again, not a great Rx market to be looking for a job in) or maybe a distressed-focused hedge fund.

[Anonymous User]

OP here - thanks for all the thoughtful responses - it has been really helpful. Agree with most ppl in this thread that restructuring big law is probably not a high likelihood / suitable option for someone in my shoes.

Just wanted respond to two common points:

1. Understand that restructuring is fairly slow right now (my team used to get 1-2 fairly large restructuring mandates every year but we haven't worked on one since 2020 - people at evc/roth/pjt are not getting hits in the sector I cover either). However, my original rationale was that restructuring work is bound to pick up in a hypothetical GFC. The 2020 covid shock was an outlier because financial stress was so short-lived and capital markets became red hot by late Q2 2020 that most companies managed to finance out of any issue they might have had. Had the distress prolonged - you will see a lot more companies exhausting their capital buffers. In a hypothetical GFC, it will probably play like 2008 and not 2020 so business will probably boom for ke/weil etc.

2. Don't know much about law firm recruiting, but in my experience restructuring banking (my firm already has one of the strongest restructuring practices on the street) and distress funds are not hiring actively in a theoretical GFC. While it is true that deal opportunities open up in such a crisis, fundraising is likely shut during extreme turbulence for most players. Banks and funds are fundamentally capital intermediaries - thus if the source of capital dries up, these firms are likely very cautious on headcount despite many potentially high returning uses of capital (there is a reason gs gave Buffet such a great preferred equity deal in 08, he is one of the very few ppl that still had significant capital to deploy whereas even the Apollo / Cerberus of the world had to penny-pinch on deals because no one was sure when they can access capital markets again). Law firms are often court / creditor appointed to help unwind various credit agreements - regardless of salvage value - thus thought they could be more open on headcount as long as activities rise (could be wrong).

[Penn3141]

Point taken about distressed funds and liquidity, but I think you’re seeing too much a distinction between RX law and RX advisory. You note that the latter isn’t particularly busy right now. Fair. The former isn’t either. If a GFC comes, they should BOTH pick up in tandem. Advisory isn’t dependent on external liquidity either.

I think Rx advisory should give you everything you’re looking for.

(Side note - would you shoot me a DM? I’m thinking of making the jump from law to finance and would like to ask a few questions.)

[Anonymous User]

1. Understand that restructuring is fairly slow right now (my team used to get 1-2 fairly large restructuring mandates every year but we haven't worked on one since 2020 - people at evc/roth/pjt are not getting hits in the sector I cover either). However, my original rationale was that restructuring work is bound to pick up in a hypothetical GFC. The 2020 covid shock was an outlier because financial stress was so short-lived and capital markets became red hot by late Q2 2020 that most companies managed to finance out of any issue they might have had. Had the distress prolonged - you will see a lot more companies exhausting their capital buffers. In a hypothetical GFC, it will probably play like 2008 and not 2020 so business will probably boom for ke/weil etc.

"they didn't go bankrupt because they were able to secure financing" is a description of what happened, but not really why it happened.

the answer is that there was unprecedented Congressional/Fed intervention to make sure that companies had access to capital and consumers could keep spending, notwithstanding double-digit unemployment through all of Q2 2020.

the '08 response was comparatively much smaller, and Powell + Mnuchin + bipartisan consensus in Congress was it was inadequate.

maybe that level of stimulus won't happen next GFC because fed/congress decides the 2020 response led to too much inflation, I dunno. maybe it won't have same effect. maybe next crisis will be actually take down a GFI.

but I wouldn't brush this off/take as a given that the '08 RX cycle is "normal" and the 2020 one is atypical

[Anonymous User]

Point taken about distressed funds and liquidity, but I think you’re seeing too much a distinction between RX law and RX advisory. You note that the latter isn’t particularly busy right now. Fair. The former isn’t either. If a GFC comes, they should BOTH pick up in tandem. Advisory isn’t dependent on external liquidity either.

I think Rx advisory should give you everything you’re looking for.

(Side note - would you shoot me a DM? I’m thinking of making the jump from law to finance and would like to ask a few questions.)

OP here - don't think I can DM on tls unfortunately - haven't posted a ton. Would your questions be identifying / sensitive? If not, I am more than happy to share any thoughts / help however I can in this thread.

[Anonymous User]

Have seen people transitioned from EB (evercore, greenhill) to rx law firms after law school. Don't know how the seniority and comp work for them though.

[jrashtian]

To OP - out of curiosity, did you make the switch?

[Anonymous User]

OP here - market window reopened, hopefully it is not a deep recession and as long as deal levels stabilize my bank / team should be holding up well enough without significant downsizing. Will try to keep going until the music runs out I guess.

[Anonymous User]

Avoid K&E Rx. That’s a declining group full of old ideas.

Having just left KE Rx, it's still the top group in the world IMO, but it's on the way down. They're falling to the Netflix effect. They had 10 years of undisputed dominance (by volume) but now enough big firms are developing big enough Debtor groups to slowly eat away at their advantage. They over-hired and now have 200 attorneys with enough work for maybe 70. There are also some big leadership changes going on there right now and, in my opinion, they are for the worse. Many of the former "rock star" partners are over the hill and on the twilight of their careers.

Also echo the sentiments of prior posters about restructuring being countercyclical. Perhaps in a higher interest environment there will be a boom of chapter 11s, but having lived through the COVID crash, it produced barely 6 months of work. I'm not so sure the "conventional wisdom" that Rx is recession proof is going to hold.

[Anonymous User]

OP here - market window reopened, hopefully it is not a deep recession and as long as deal levels stabilize my bank / team should be holding up well enough without significant downsizing. Will try to keep going until the music runs out I guess.

Glad it's working out for you, OP. Just wanted to chime in as someone who left finance to go to law school (also HYS) and am now stuck in law (DC lit, not NY corp) I am very jealous that you figured out the finance trajectory and have stuck it out. I think you would have been making a mistake to come back to the law firm side; the comp is just not there, and neither is the pace or exit optionality.

[Monochromatic Oeuvre]

Not a single mention ITT of *why* banking VP is highly confident of a “Great Depression-level crisis.”