From New York and London, to Frankfurt and Milan, investment banks and restructuring boutiques are hiring. In many cases, the process is being given a boost by changes to national bankruptcy codes.
But murmurings of a soft market also could be fanning the flames. "Restructuring boutiques are thinking about hiring in London for two reasons," says Logan Naidu, a consultant at recruitment firm the Cornell Partnership: "Firstly on the back of increased private equity investments, and secondly because they're expecting a market downturn in the next 12-18 months."
"We're starting to see hiring activity in the restructuring space," says Gary Goldstein, chief executive of financial services search firm the Whitney Group. "A lot of banks got out of the business in the mid-1990s and are now looking at moving back in."
In the US, Goldstein says banks are being encouraged to re-enter the restructuring business by the first changes in the bankruptcy laws for over a decade. The changes have made it possible for banks with distressed debt trading teams to act as restructuring advisors without being censured for conflicts of interest.
One of those to have taken advantage of the new state of affairs is Piper Jaffray, the West Coast investment bank, which hired a team of restructuring advisors from CIBC World Markets in February.
Hiring outlook in Europe strong
Updated bankruptcy laws are also behind restructuring recruitment in Europe. Giuseppe Farinacci, a director at the Italian office of boutique restructuring firm Alix Partners, says Italian bankruptcy laws are being reformed to resemble Chapter 11 in the US.
Some of the changes have already been made, while others are set to come into force in July this year. "Italy's bankruptcy laws will contain a number of measures which are more geared to reorganisation than liquidation," says Farinacci.
Little surprise, therefore, that Farinacci says Alix Partners is hiring. So is Alvarez & Marsal, another restructuring house, which plans to increase its Italian presence from five to ten in the next six months, as well as adding 10-15 other hires across Europe.
In Germany, Andreas Weik, a consultant at search firm Hofmann Heads, says restructuring recruitment has been given a boost by a similar Chapter 11-style revision of the bankruptcy laws, which took place in 1999. Weil says hiring activity is focused in restructuring boutiques: "Alix Partners, Kroll, Alvarez and Marshall, Servicing Advisors, Hudson Advisors and SKG are all recruiting here." Separately, Houlihan Lokey Howard & Zukin, a US boutique with offices in the UK, France and Germany, says it has plans to add between 5 and 20 staff across Europe in the coming months.
There are indications that some of the big investment banks are looking to increase their share of the European restructuring action. While advisory-focused banks such as Rothschild and Lazard are the established heavyweights in the area, others are moving in. Goldman Sachs formed a European restructuring team in 2003, which now employs around 30 people. Lehman Brothers recently relocated Michiel Post from New York to London to work in its European restructuring team, and is looking to hire several juniors.
Private equity in the driving seat
Countries such as the UK haven't experienced tinkering with the bankruptcy laws, but recruiters say there are other hiring drivers.
With bankruptcies and credit defaults widely expected to increase in the next few years, distressed debt funds are set to become more widespread on both sides of the Atlantic. Texas Pacific Group, a US buy-out house, recently announced plans to raise a $1bn (€800m) fund to invest in the debt of companies emerging from bankruptcy or restructuring. Rival private equity firms such as Blackstone and the Carlyle Group have similar funds already.
Scott Pinfield, senior director at Alvarez & Marsal Europe, cites private equity groups as one factor behind European expansion at Alvarez & Marsal. "Private equity organisations are increasingly using us for 18-24 month interim management assignments," he says. "This is consistent with private equity firms taking on more investment opportunities where they know from day one that they will have to drive significant operational change in order to generate the returns they require."
Basel II, the banking capital requirements, which include specifications for non-performing loans, are also stimulating restructuring activity, according to Farinacci at Alix Partners. "Banks are having to resolve situations they had previously put on hold," he says.
However, some restructuring specialists advise against calling the sector's imminent recovery. "Over a reasonably long time frame the restructuring market will get a lot more active," says David Ying, co-head of restructuring at New York-based Evercore Partners. "But a lot of people have expended a lot of ink on predicting when, and it hasn't happened yet."