Saturday, May 10, 2008

Paris - First Impressions

After a long week in London, the journey has now moved across the English Channel and arrived in Paris.

I’ve always had France high on my short list (ok, my long list) of places to go someday, even thought I have often heard clich├ęs such as “it’s a really dirty city” or “they all hate Americans and refuse to speak in English”.

After being here for few days, I can say that I have not met a single unfriendly person yet, nor I have I seen anything I would consider “dirty” other than the dirt itself. It’s true. There are a lot of un-paved areas around most of the monuments and people are forced to walk in the dirt. What’s with that anyway?

But if you look past the actually dirt (and a few random red-light districts like Moulin Rouge), you will find a beautiful city with friendly people and excellent cuisine, art, and culture. To top it off, you also have a number of monuments with breathtaking grandeur.

A few random observations and recommendations: The street market near Sentier, paying 1 EU for a bike to ride around anywhere, don't rush to see all the tourist sites; to really appreciate Paris you have to slow down and let it consume you.

There were a few things that really caught my attention and made me think… why do they do it what way, or even better… why don’t we do it that way? Stay tuned for our subsequent blogs called: Innovations from Abroad.

For more information about the CBS Pre-MBA World Tour, visit

Tuesday, May 6, 2008

The cost of earning a living in London

Today we met with a few US expats who are currently working in London. Robert works at JPMorgan in the credit risk department where he is responsible for making trades to hedge certain risks that the JPM assumes on behalf of its corporate clients. The other expat, Simon, works at a US-based hedge fund called Davidson Kempner Partners, where he is responsible for managing a portfolio of assets using an investment strategy called “event arbitrage”.

Instead of writing about the investment strategies and career perspectives of these two individuals, I thought (since we will be learning this at Columbia anyway) it would be more interesting to discuss the true cost of working in London. In an earlier blog, we discussed the cost of visiting London, but that was just the beginning. If you plan to actually work in London, you’ll need an apartment (or flat) which is likely to run you between £300-400 per week (translation: $2,500 - 3,400 per month). Most expats receive some type of housing subsidy, which helps reduce the cost, but that’s still just one side of the equation.

You’ll also want to consider that your salary and/or bonus might be in USD (and much of the time it is). This will subject you to additional foreign exchange risk, which for the last several years anyway, has only shrunk the paychecks for most US expats. And if you’re expecting the company to feel sorry for you, and give you a step up in pay, do bet on it. That said, if you are into betting, you can hedge your forex risk by selling USD early in the year, and buying it back when you get your bonus. Assuming you then get the bonus you were expecting, you will have offset the exchange risk you experienced between those two periods of time.

Another major consideration is tax. If you’re a US citizen, you are required to pay US taxes—regardless of where in the world you earn your money. This means that you’ll have to pay tax not only to Uncle Sam, but also to the Queen of England (can we call her Aunt Lizzy?).

I’m sure we’ll have more ideas on this topic once we get to Dubai.

For more information about the CBS Pre-MBA World Tour, visit

Monday, May 5, 2008

Restructuring: is now the time to get in?

Today we visited with a lovely fellow (as they say here in England) at Blackstone who works in the corporate restructuring group.

Following are a few highlights from our conversation:

Restructuring is a fairly new concept in the EU; not very many banks or corporations are very familiar with the practice, so it’s a fairly nascent market. The UK has much stricter bankruptcy laws, which mean that the whole restructuring concept is a bit trickier to deal with. Blackstone is one of the few firms doing restructuring deals in the EU, but Houlihan Lokey and Lazard are a few of their main competitors. The restructuring market is much more saturated in the US, but it remains to be a very small (and cut-throat) community.

At most firms, restructuring generally falls under the "advisory" business, but is very different from M&A or capital markets. While M&A transactions typically involve a fairly straightforward auction process (build a book, build a list, call the list), restructuring deals are much more complex and unique. Why? Because they involve several more parties per transaction and are often less predictable. Most companies undergoing restructuring transactions are over-levered and have serious operational issues in addition to their capital structure (i.e. a liquidity crisis). Also, there is much more tension and drama involved because there is generally a losing party involved; so unlike an M&A deal (where each party is excited about their newfound "synergies"), restructuring generally involves a bit of pain for the equity holders during the de-leveraging process. Unlike an M&A deal, banks are typically brought in and retained (hired) by the creditors, rather than the corporation or the equity holders.

As most of us know, restructuring is a counter-cyclical business. For those that are less familiar with the term, this means that when the market is hot, the restructuring guys get to play golf on the weekdays, but when the market crashes (and all the other bankers get laid off), these guys roll up their sleeves and get to work.

At the first open house, we were all giving each other high fives for timing the market just right and getting into b-school at just the right time. A lot of people are thinking about going into restructuring in order to capitalize on the much anticipated recession, but is now the right time?

It's yet to be determined, but (according to my new friend at Blackstone) chances are... it’s too late. Restructuring isn't something you get into for the short run; it's a very specialized practice that takes a few market cycles to really understand the business and get to know the players. It also has a short window of opportunity because, unlike the weather in London, there are typically more sunny days than rainy days in any given market cycle.

That said, Blackstone hasn't seen any significant increase in restructuring deals... yet. It seems that most of the de-leveraging has been taking place in the capital markets, but hasn't yet hit the corporations, who seem to still have a lot of cash on their balance sheets. A few bad quarters and this could change very quickly.

Okay, there it is. I'll end with saying that I don't have a restructuring background, and most of this information was derived from one conversation, so I'd love to hear anyone else's thoughts about the matter. Is now is the right time to get into restructuring?

Feel free to post comments on any of the blogs. They are here to make us all smarter, so feel free to add any additional insight you might have!

For more information about the CBS Pre-MBA World Tour, visit

Sunday, May 4, 2008

Lunch with the local Parish

This morning I was awoken by church bells (something I'd only really heard in the movies) and I decided that, since I was in England, I should naturally try out the Sunday service of the Church of England. As an American protestant, I have visited a few Roman Catholic cathedrals in the states, but have never visited an Anglican church, let alone even really known the difference between the two (besides the famous schism from Rome by King Henry VIII).

After service, I decided to stay and visit with a few of the local members and soon got invited to tea with the priest. Tea turned into a full meal and pretty soon I found myself laughing and sharing stories with several members of the Parish's leadership team (sorry, not sure what the correct word is). It was fascinating to see that behind the tall hats, shiny robes, and complicated words they were ordinary people who had similar interests and even a sense of humor!

For more information about the CBS Pre-MBA World Tour, visit