Stuart B. Gleichenhaus is a senior managing director in the Corporate Finance practice of FTI Consulting, named Global Turnaround Consulting Firm of the Year for the 9th time since 2015 by the Global M&A Network. Gleichenhaus has 45 years of experience holding operational/financial officer roles and structuring/restructuring numerous leveraged transactions.
He led, co-led or co-founded practices in Merger Integration & Carve-Outs, Office of the CFO Solutions, SPAC/IPO, and chemicals initiative. He “covers” several PE firms with expertise in chemicals; industrials; consumer; health care; energy, power and products; telecom and financial institutions.
He has served as a CEO, CFO or equivalent at a dozen and a half companies. Gleichenhaus has led the establishment of standalone finance organizations on up to four continents. Prior to joining FTI Consulting, Gleichenhaus served as interim Chairman, CEO and Chief Restructuring Officer of EaglePicher.
Before that, Gleichenhaus led the Southwest restructuring advisory services and the oil and gas industry transactions advisory services in North America for Ernst & Young Corporate Finance. He also worked for 20 years in corporate finance, M&A and high yield capital markets at the investment banking firms of Merrill Lynch, Salomon Brothers and Bank of America.
“I have seen too many instances in which executives take their eyes off the ball by becoming enamored with external markers rather than the importance of positive and sustained cash flow as the lifeblood of companies. This may be when investors and boards need to make uncomfortable personnel decisions and bring in new leaders to focus on the correct inside corporate finance markers.”
Gleichenhaus graduated with a B.S. in Engineering (Operations Research and Financial Engineering) from Princeton University and an MBA from the Harvard Business School.
Q. What should MBA students understand about the distinctive career advantages of joining a turnaround and restructuring firm such as FTI rather than pursuing the usual target firms at HBS and other M7 schools? In particular, how do the intensity of distressed situations, exposure to cash flow and capital structures, direct interaction with boards and lenders, and opportunities to lead implementation prepare MBAs for future roles as CEOs, CFOs, private-equity operating partners, and/or investors?
A. Gleichenhaus. While one can gain valuable work experience at the familiar firms to which M7 students often aspire, turnaround and restructuring employers provide a unique environment that tests a person’s ability to execute and deliver concrete results in situations where there are usually no playbooks to reference and where time is measured in minutes and hours, not weeks and months. Having worked for about 20 years in investment banking, I remember the various templates/punch lists the firms provided to execute the completion of transactions.
However, when your client is going through a restructuring, whether in or out of bankruptcy, there are no hard-and-fast playbooks, given the acute pain that the various stakeholders are experiencing. Candidly, every minute counts, and things get boiled down to their essence.
For your healthcare readers, our vertical enables professionals to combine their prior experiences in biopharma, healthcare services and products, artificial intelligence, and other fields and apply them to help companies navigate turnaround situations. In fact, FTI continues to expand its healthcare leadership team in response to strong demand for such expertise.1
For some people, turnaround and restructuring roles are not a good fit. After all, they may have leveraged past tried-and-true playbooks to follow a well-trod pathway to get into the right college and graduate school.
Many will be successful by leveraging the playbooks that familiar firms provide, whether through an LBO template, a checklist for supporting an M&A transaction, or the 175-step punch list to execute and complete a public securities offering. But there are individuals who want to test their mettle, to see whether they can develop creative ways to stop a client from bleeding cash, to turn a money-losing company into a profitable one, or to negotiate with creditors clamoring for repayment, all without a prescribed playbook and under acute time pressure.
Moreover, many MBA graduates in the finance field become fixated on “outside corporate finance” scores and markers of success, such as headline IPO prices and valuations. In reality, however, it is the “inside corporate finance” elements that drive sustainable success for companies.
In other words, stock prices, bond interest rates, market capitalization, and other outside indicators are important measures of a company’s worth, but the engine of and the essence of a successful company’s finances are how it can reliably fund growth, capital expenditures, operating expenses and acquisitions, i.e., creating a sustainable value which will be reflected in quoted prices and deal values.
I have seen too many instances in which executives take their eyes off the ball by becoming enamored with external markers rather than the importance of positive and sustained cash flow as the lifeblood of companies. This may be when investors and boards need to make uncomfortable personnel decisions and bring in new leaders to focus on the correct inside corporate finance markers.
Roles in turnaround and restructuring work can include company-side advisors, creditor-side advisors, and interim management. In the latter capacity, I have been brought in some dozen and a half times to serve in interim roles and help course-correct troubled companies.
In each instance, I was not brought in for the templates I acquired during my investment banking days or pre-baked roadmaps that I see from traditional strategy consultants. Rather, I was asked to assess each situation quickly and develop a focused turnaround plan, usually centered on just one or two, no more than three, urgent priorities to address the problems.
While it may sound counterintuitive to readers who might be intimidated by distressed engagements, it is worth recognizing that bankruptcy proceedings can, in certain instances, be a positive event from a finance standpoint. Immediately before a filing, a company may be struggling to pay its vendors, employees, and lenders.
Concurrent with a bankruptcy filing, a debtor-in-possession (DIP) financing may provide new funding to a company, while there is typically a stay or hold on most debt service, allowing it to continue operating while it restructures, sells assets, or pursues an orderly wind-down in an organized/supervised process. The company’s existing management typically remains in control as the “debtor-in-possession,” subject to court oversight.
It is by no means easy to operate in this environment, but a recent graduate can have an extraordinary opportunity to learn in a short period of time. Someone will learn vastly more about all the detailed workings of credit agreements of all stripes (loans, high yield bonds, private credit) under stress than even if they were on a capital markets desk at an investment bank structuring the various credit instruments.
A keen understanding of all the rights embedded in each layer of a complex capital structure lays out the playing field for all the competing parties to play the game of restructuring the balance sheet. In a bankruptcy, a judge can help bring stakeholders toward compromise, and the process can create unusual flexibility to renegotiate obligations and pursue operational changes.
That flexibility, however, exists within an intense, court-supervised process. For a recent business school graduate, rather than participating primarily in pitching, selling, and executing standard form engagements, so-called rinse-and-repeat at traditional firms; there is an opportunity to execute actions that address the financial and operational pain points of a live volatile situation.
The opportunity to be more creative exists greatly in the restructuring arena. Where else can an early-career professional be on the front lines of complex negotiations involving an out-of-court liability-management exercise (LME)? An LME is a negotiated transaction between a borrower and some or all of its creditors.
Companies increasingly use private debt restructurings to manage excessive debt or a looming liquidity problem instead of entering a formal Chapter 11 process. LMEs can preserve operating flexibility and avoid the expense, publicity, and time involved in bankruptcy.
They can also be controversial, however, because some ad hoc groups of participating creditors may receive better economics, such as new first-lien debt or priority claims, while nonparticipating lenders may be pushed down the repayment hierarchy. The interactions can be intense and exhausting.
Still, if an individual performs successfully, opportunities often arise for advisory roles and executive positions because that person has developed a track record of financial results, not merely an ability to create polished slide decks. Lastly, as graduates continue through their career, increasingly the private equity world is looking to the various professional services firms for recruitment of experienced people.
Historically, the PE firms recruited heavily from the analyst and associate classes at the Bulge Bracket Investment Banks and from the ranks of the traditional strategy consulting firms. I believe increasingly the PE firms and private credit firms will appreciate and value the track record a junior, or even senior professional has experienced at a turnaround and restructuring firm as representing even better background for driving value in the private investing world, whether as a deal person or an operating partner role.
Q. For students who want to test their mettle and enter the turnaround and restructuring industry, what are your top three recommendations?
A. Gleichenhaus. First, if you are at a school (such as an Ivy League institution, Chicago, Northwestern, MIT, or Stanford) where the traditional strategy consulting firms or the Bulge Bracket Investment Banks and other elite professional firms are part of the regular recruiting landscape, recognize that strong candidates are also applying for roles at leading firms including FTI or the other couple of comparable turnaround and restructuring advisory firms.
From personal observation, I have seen many students from other excellent schools, both public and private, particularly with strong finance and accounting programs, secure FTI summer internships, with many receiving full-time post-graduation roles. While pedigree helps, the competition is intense.
Second, as you noted, some Wharton undergraduates are considering law school. They can enter this industry through top law firms with strong turnaround and restructuring practices, including all of the top tier nationally recognized law firms.
Finally, students seeking to enter this field through investment banking should look beyond the firms that may dominate the campus recruiting conversation. A number of high quality “boutique” restructuring investment banks, offer highly relevant restructuring platforms and can provide an exceptional foundation for a career in distressed investing or in-court and out-of-court capital markets-driven experiences.
That is the central takeaway from this Q&A: do not let a conventional recruiting playbook define the boundaries of your ambition. The most formative opportunities often sit outside the most familiar pathways, where the work is urgent, the stakes are real, and strong judgment can create measurable value for companies, creditors, employees, and investors.
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About the Author
Michael Wong is a Part-time Lecturer for the Wharton Communication Program at the University of Pennsylvania. As an Emeritus Co-President and board member of the Harvard Business School Healthcare Alumni Association as well as a Contributing Writer for the MIT Sloan Career Development Office, Michael’s ideas have been shared in the Harvard Business Review and MIT Sloan Management Review.