Financial Restructuring: Guidance for Young Professionals

In this One-on-One interview, Managing Director Surbhi Gupta talks to Russell Sherman about her unusual career path into financial restructuring, what it takes to succeed in this field, and why she values the strength of the culture at Houlihan Lokey.

In the interview, she addresses the following:
  1. The importance of creativity in financial restructuring situations.
  2. Why diversity and inclusion are at the top of her—and the firm’s—agenda.
  3. What type of personality is best suited for a career in financial restructuring.
View the transcript

Russel Sherman (00:00): Welcome to Houlihan Lokey One-on-One. I'm Russell Sherman. Today, we are joined by Surbhi Gupta. She’s a Managing Director within the Financial Restructuring Group, where she’s focusing on a number of different assignments regarding bankruptcies and restructurings. Surbhi, great to see you.

Surbhi Gupta (00:33): Thanks for having me.

Russel Sherman (00:35): So you've had an interesting career. You’ve been at Houlihan Lokey for more than 15 years. Started in London, then went over to New York, now one of the senior leaders in the department. Kind of an interesting start though. You actually thought you were interviewing for a different position at Houlihan Lokey—thought you were going into M&A, ended up in restructuring. Talk to us a little bit about that.

Surbhi Gupta (00:58): Sure. Yeah, I fell into restructuring a bit from a nontraditional route. So I went liberal arts, went to Swarthmore, pursued economics and math, and candidly was unsure about which avenue I wanted to take from a career standpoint, whether it was more economics, academic driven, or finance driven. And so I decided to pursue another degree at the London School of Economics in Finance and really focused in there and decided that, yes, finance was really where my core passion lay. And subsequently to when I was doing the recruiting process, you know, this is back in 2004, right where M&A was a boom cycle. So everybody was talking about investment banking and pursuing an M&A opportunity. And so that's where my interests lay, and I interviewed at Houlihan thinking it was for a position in the M&A group. And, lo and behold, I got a call thereafter saying, “Hey, we think you'd be great in restructuring.” And unlike some of the candidates we get today, I actually did my research after the fact and ended up thinking, wow, this is quite fascinating. Getting in at that time, we had started the first restructuring practice outside of the U.S. It was very entrepreneurial being there at the starting point to help shape its evolution. It was a fascinating place to be. And so like many things in life, you know, timing, luck, and hard work, but I just happened to be at the right place at the right time.

Russel Sherman (02:38): Surbhi, when you think about restructuring, you usually think about hardcore finance, not necessarily a liberal arts background, someone who graduated from Swarthmore. But talk a little bit about the fact that there is a role that that liberal arts background and that creativity really plays in restructuring and bankruptcies.

Surbhi Gupta (3:00): Absolutely. I would tell you that the finance side of investment banking is one element, and it is important to have the fundamentals of what I'd call valuation really. But more so, and what a liberal arts degree really delivered for me—and I saw it throughout my career, even to this day—is the ability to synthesize complicated concepts and communicate those effectively, both in writing and verbally to a client. And that's really honed in from a liberal arts perspective and has been critical. So one aspect is the analytics, but the other is how do you deliver those analytics to the client? How do you explain what the Excel has spit out, so to speak, in a way that's easy to understand? And you have to, these concepts, but from a restructuring standpoint, are complicated, not just because of the actual transaction but also because fundamentally you're asking somebody to take a reduction in their debt, right? You're asking a company to maybe going through a bankruptcy process, which has a lot of other bells and whistles attached. And two, you're trying to explain to them what is the process going to be like? You're handholding a CEO and CFO through it, for many for which it's their first time. And so it's a combination, just delivering a message but being there and communicating to them on a very frequent basis all the ins and outs of the restructuring process.

Russel Sherman (04:40): Do you think, and the more I hear about restructuring, the more I think about it, I realized that there is actually a creative side to it. As you said, not necessarily just formulaic or by the numbers. Talk about how that creativity plays a role and maybe how someone coming from your background, a little bit different background, actually was able to adapt so well to the restructuring practice.

Surbhi Gupta (05:06): Yeah, it's a great question. I would tell you it's a couple of things stepping back. Restructuring, right, at its fundamental level is about addressing the balance sheet of a business and because of some catalyst. That catalyst could be liquidity driven, it could be you have a near-term maturity of your debt in your capital structure, it could be any number of catalysts. As we saw with the pandemic last year, for many of these businesses, it was simply because their revenues had become lopsided vis-à-vis the debt that was in their structure and what they were able to service on an ongoing basis. And so we focus a lot on figuring out what is the right capital structure here to best position a business on really solid financial footing for the future. And the level of creativity that comes in can be at all different elements of a lifecycle of a deal. It's how you structure a deal. It's how you figure out what kinds of consideration you can give to various constituents—debt, cash, equity—how you play with those variables and how you effectuate a transaction. Whether it's in court, out of court, a lot of people believe restructuring is synonymous with bankruptcy. That's just not the case. Many of the transactions that we do are done out of the public eye, and we purposefully, you know, they’re shrouded in secrecy so we can effectuate them in the most sort of optimal consensual manner. As an example, for instance, we did Party City last year, which many may know as the go-to supplier for all things party-related. That was a business that, again, was hard hit by COVID, and the debt and the capital structure actually started to trade down quite meaningfully. And there was a view that this business has a reason to exist. It has a purpose. There is a customer there. We all go to buy balloons at Party City and all the other sort of supplies that come with celebrating any sort of event. And there was a view on the capital structure and on the company side of let's leverage, let's utilize the fact that you have debt that's trading at a discount to figure out a way to create some deleveraging—i.e., take some debt off the balance sheet to best position the business—but also do it without having to go through a bankruptcy filing. Let's try and do something on an out-of-court basis that provides some new money for the business, allows them to invest in their business going forward, but also provides some deleveraging and reduces the interest costs of the capital structure. And we were able to do that consensually completely out of court, out of the public eye. And we announced it, and we did it expediently in three months, soup to nuts. And from a liberal arts background perspective, I guess just the last piece of that is, you know, there's a focus in all areas of investment banking to have the technical expertise down when you join. I think the one area that's often underemphasized, rather, is the ability to communicate, right, to be able to talk to clients. And especially in restructuring, these are businesses that are needing to fundamentally reduce the amount of debt, in most cases, on their balance sheet. And that's a very tough conversation, both for the company to acknowledge that they have too much debt but also for creditors and people that have lent money to say you're not going to receive the same sort of return that you were banking on when you originally lent this business that capital. And so it's about communicating with the client, communicating with CEOs, CFOs, demonstrating knowledge, comfort, handholding explaining complicated concepts. A lot of people aren't familiar with bankruptcy processes, if you avail yourself enough of that. And so just, you know, being able to communicate and not just being laser-focused on the analytics and what the numbers say, and being able to synthesize that and communicate it succinctly, is a very key skill that I think, from a liberal arts background, I was able to bring early on into the process.

Russel Sherman (09:23): Well, it really seems like you tap into a number of different skill sets, whether it's the analytical side, obviously there's influence involved, psychology plays a role. So lots of different, interesting traits seem to be at play when you're talking about restructuring bankruptcies and other types of negotiations.

Surbhi Gupta (09:41): And we also don't forget. We also pretend to be lawyers sometimes. You know, we, a lot of what we structure, again going to the creativity aspect, is reading the documents. You know, these are all contractual agreements between a company and the lender. And you've got to read the provisions, and we've come up with ways to—again, going back to Party City—utilizing the documents to come up with ways to structure a deal. That is a win-win for both the company and for the creditors.

Russel Sherman (10:14): Let's talk a little bit more about your journey and what it's like to work at Houlihan Lokey. You were fortunate in the sense that there was a little bit of an entrepreneurial aspect when you joined the firm. The department was not that big. Is that one of the benefits in your mind of joining a firm that can be smaller, where at least a department that is just getting off the ground? And how should people who are looking at careers and trying to think about where they want to go think about size and the amount of exposure one person would get in one situation versus another?

Surbhi Gupta (10:56): Really good question. I would tell you yes. When I started in London, it was the first restructuring practice that we had opened outside of the U.S. so, yes, very entrepreneurial. However, as we've grown in size, we have actually stayed true to the entrepreneurial spirit that really jump-started the business, you know, 30-plus years ago. And I say that because in a few different ways, you see it across our culture, frankly. One is in the longevity of the finance professionals at the firm, and that's across all of our product lines. And, you know, whether it's the Co-Heads of our group, David Hilty and Eric Siegert, who've been here for 30-plus years, my tenure actually pales in comparison, but we have many that are in that 25, 30-plus year tenure. The other side of it is, in restructuring, we talk about the lifecycle of a business, and we talk about our job not just ending once you've effectuated a balance sheet transaction but what's the next step and how do you put a business on the right footing going forward. And that requires collaboration. It's not just restructuring expertise. That taps into our M&A expertise. That taps into our FVA expertise. Some of these businesses that we value—retail I know is tangible, and it's easier to understand—but there are other sectors that we work in that are much harder to do so. And so we tap into our valuation colleagues to help with understanding the core valuation precepts of the business and the drivers. We talked to our M&A colleagues about what are exit strategies for our business. How do we think about roll-ups here? Who are the right board members to be leading this? What's the right C-suite composition? And so when you start collaborating, which is a fundamental building block really of how Houlihan started and, you know, fostering that level of connectivity is really key to our success. And it creates that entrepreneurial and sort of smallness feeling when you're able to collaborate, just pick up the phone, call somebody in the M&A group, in the retail group of our M&A practice or the industrials or the automotive or the TMT side and just say, hey, what do you think about this business, right? You're able to harness what is our singularly most important skill, which is human capital, right? We are able to harness that and really deliver the best value for our clients. And I think, you know, making sure that we mentioned that day one to a lot of our incoming analysts and associates, that we're only as good as the team that we deliver to the client. And that team is not just focused on the product. It's focused on the industry expertise and all the other bells and whistles that come with delivering the final product. And I think being able to expand our analysts and associates’ horizons to other talent across the firm really delivers and gives them a sense of that entrepreneurial spirit, where, you know, you can, there's no issue picking up the phone and calling somebody to get, you know, get their insight.

Russel Sherman (14:24): Was there a feeling of mentorship? Again, you're joining a very small department, it's growing over time. But did you have this feeling of mentorship, and do you feel that still? That culture of mentorship, that culture of collaboration still exists even as the department and the firm gets a lot bigger.

Surbhi Gupta (14:46): One hundred percent. In fact, it’s one of the reasons that I've stayed at the firm for as long as I have. Now, you often hear people cite it's because the people, right? I've stayed for as long as I have because if I were to be in the trenches past midnight, who else would I rather be with? It would be with these people that I love to get to know both personally and professionally. But there is an element of, I think, if you peel back a layer, it's really about mentorship. When you think about a career that spans five, 10, 15, 20-plus years at a single place. It's not just about the meritocracy and putting in the hard work, which we have and we are very focused on, but it's also about providing guidance. And I think about my own trajectory over the last 15 years and the people that have helped me. And it's been across the product lines. It's been folks within restructuring who've taken me under their wing to provide me with the opportunities to succeed. But it's also been colleagues across M&A, FVA who have lent a friendly ear to say here's the things that you should be thinking about, here are ways to increase your visibility. A lot of what we talk about in investment banking is networking, right? And it's such a focus on external networking. How do you build your Rolodex? One of the things that gets underemphasized and is really driven by this mentorship model is increasing internal visibility, right? It’s to get to be known not only within your product line but across the firm, across the geographies. And as big as we've gotten, that mentorship that happens in a very natural, organic way at Houlihan allows the incoming classes to really harness and grow the mentorship base over the course of their tenure. And, you know, we pair, you know, when I was an analyst, I had a senior analyst that helped me and associates that helped me as I went further up the ranks. You know, when you have promotions, you have VPs helping associates to think about what's that next level? What's the officer role look like? How do you manage a team? So there's a constant evolution of the mentorship model, as well. It's not just one person throughout your lifecycle. It's different people at different times during your career who can really help you maximize, you know, your potential at that moment in time.

Russel Sherman (17:22): You've grown up at the firm, both professionally and personally, started a family during the course of your tenure at Houlihan Lokey. Can you speak to the work-life balance, what that's been like, and how you've navigated that?

Surbhi Gupta (17:37): Well, work-life balance is a very a tough phrase. I don't know that I believe in work-life balance. I think it’s a very relative thing that we all have to figure out for ourselves. And the good news is, and what I've been able to do at Houlihan, is create a schedule that works for me, that works for my family. And I think it's about setting boundaries. It's about figuring out, okay, I get to work at this time. I also, you know, need to leave by X time so I can see my kids at night for a few minutes before they go to bed. It's about finding ways to—and that I guess that balance isn't always there every day. And it's also about just being okay with things falling through the cracks. It's about being okay with not making all the calls that you needed to in a given day because you have to deal with school-related issues or parent-teacher conferences. So I think there's a certain understanding, and that just comes with the fact that you're juggling a lot more than you were. And while, you know, previously, before I had kids, there was no limit to how many hours I could work in a given day. I would stay till 10 midnight. Whatever needed to get done, I would stay there and be with the team to do it. Now I found ways to just be also more efficient. So, to me, work-life balance is a combination of boundaries. It's about understanding your own limitations, frankly, and three, it's about being more efficient with your time that just naturally comes with having a family and having to prioritize.

Russel Sherman (19:24): Unfortunately, I'm not sure there's much work-life balance these days when we all live at work, thanks to the pandemic.

Surbhi Gupta (19:33): Yes, that's an understatement. I would say that I'm actually coming off of one week where my kids were at home quarantining from school because of a case. So, you know, my ability to do work efficiently was, you know, I had to remind my deal teams, look, I just, unfortunately, I'm gonna miss XYZ call. I'll catch up after or I'll get to it later in the night. And there was an accommodation, right? People understood that I may not be looking at emails as frequently, as regularly. So, you know, we all kind of rolled with the punches and we, and, you know, part of a team, you cut each other slack when you need to.

Russel Sherman (20:15): The work atmosphere that you've described at Houlihan Lokey feels to be a nice mix of formal and casual in the sense that you guys are all ready to put the suit and tie on and suited and booted when necessary. But maybe that suit’s hanging on the back of the door, and you guys can sort of have a little bit more of a relaxed atmosphere as you go about the normal workday. Can you talk about that balance and why it appeals to you so much?

Surbhi Gupta (20:49): Yeah. Look, I think one of the things that is part of our culture is, to put it simply, is not to take ourselves too seriously, right? Where we come into work, we put our head down, we do the work, we work in a team. You know, oftentimes there are folks that will knock on my door and say, “Hey, have you ever done a deal like this? Could you help me out? I think you did a situation like this a couple of years ago.” There's a lot of collaboration, not just within your strict deal team but across the platform. We all understand we learn from each other. And, you know, I think that's just ingrained in who we are. It’s about, again, it's a meritocracy, it's about putting your best foot forward. It's not about how you dress. And, you know, it's really about the delivery of the product. Now, that being said, we want to have our analysts and associates whenever we can. We bring the full team to meetings, right, and we want to be inclusive. And so recognizing that everybody's not wearing a suit and tie, myself included these days, we have full closets now where people have all bits of paraphernalia ready to go. Because on a moment's notice, you never know. You have a meeting to go to and you'd rather not have missed out on the opportunity just because you didn't have the right attire handy. So I think we, I think what that signals to me is just there's just a general flexibility. There's a, you know, you gotta be comfortable. You know, you're working long hours. Be comfortable in who you are and how you dress, but be ready to go when you need to be.

Russel Sherman (22:29): You are one of the most senior women in the department. Share your thoughts about the importance in your mind of diversity of thought, diversity of background, and what it means to the overall work product and how you think about it from a recruiting standpoint when it comes to building a team at Houlihan Lokey.

Surbhi Gupta (22:54): Yeah. I mean, the diversity of all kinds is very much front and center for both myself as a woman of color but also at the firm. Given what's happened in the last year or 18 months, we have started the Diversity, Equity, and Inclusion Council [DE&I] as part of an endeavor to create and increase a few things: to increase representation, retention of individuals of diverse backgrounds, it's to foster culture and community building and embrace diversity of thought, and it's to force leadership to really enact policies that are helpful in fostering a greater sense of diversity. And so we have, through those endeavors, we've really empowered, I would think, our junior staff to come up with ways—you know, it's not just about a top-down approach, right? It's about junior staff, empowering them to be thought leaders to help us navigate how do we increase diversity. And so what were some of the things that I do, I spent a lot of time on the mentorship side, as it relates to retention. On the recruiting side, we spend considerable time recruiting candidates at our schools with diversity as a core precept of that. And then thinking about policies, you know, whether it is, simplistically, maternity and paternity leave all the way to how do you just foster greater connectivity? We've all been working virtually, right? How do you build community? How do you create that sense of community that we've all benefited from for the last several years? And so creating even opportunities for junior staff to interact with senior leadership, understand where's the firm headed, right? What are you thinking? Scott Beiser, how do you think about the next steps in Houlihan's evolution and lifecycle? So there's, it encompasses a lot of different types of just connectivity and embracing of diversity. And that diversity is not just ethnic diversity or gender. It's also just diversity of thought and getting all those minds to the table and making them understand that they have a seat at the table. And so I spearhead some of the subcommittees at the DE&I level that are really focused on attracting junior talent that sit on those subcommittees and say, okay, what do you think? How do you think we should tackle XYZ sort of situation?

Russel Sherman (25:51): It's been a really interesting conversation, but before we let you go, I’d love your thoughts on, in your mind, the type of candidate that does particularly well in restructuring. What are the skill sets? What's the type of personality that does well?

Surbhi Gupta (26:09): So let me, I'll prioritize it for you if I could. I would say, first and foremost, personality-wise, having somebody who's incredibly passionate about learning and being able to thrive in the chaos that is often the restructuring world. We're dealing with situations that go bad to worse in a minute and businesses that are running out of cash, as we saw with the pandemic last year. So being able to react quickly, help a business get to stable footing, and deliver a solution and in a very quick manner to what is a falling knife of a situation. Those are really some of the key personality traits that we're looking for. The other two aspects that we've touched on previously, one is just a more fundamental understanding of finance. It doesn't mean that you need to have a degree in finance to pursue a career in investment banking. Anybody can pick up a book on valuation and understand how do you value a business using some of the key methodologies. And you can learn that in your own time. I guarantee you it's easier than almost any major that you're taking in college. And, lastly, is communication. It's often underemphasized in investment banking, but the analytics will only get you so far through your formative years in banking. What really propels you to the next level is your ability to communicate both within your deal team, with leadership, and with the client.

Russel Sherman (27:45): Thriving in chaos does definitely not sound boring. Surbhi, thanks so much for spending time with us. Really interesting conversation.

Surbhi Gupta (27:55): Thanks, Russell. Appreciate the time.

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