In the latest episode of the TMA Chicago/Midwest Podcast, I sat down with Harold Israel and Jack O’Connor, partners in the Financial Services and Restructuring group at Levenfield-Pearlstein, LLC. Together, we discuss the evolution of “bankruptcy” to “restructuring” law practices, the decision-making process for distressed companies facing the question of whether “to file or not to file” for bankruptcy, the potential non-bankruptcy alternative solutions at their disposal, and the potential for pre-packaged cases or Subchapter V as solutions for middle-market companies looking to reorganize in bankruptcy. Our guests also share insights on the importance of becoming involved in professional organizations such as the TMA, as well as each of their experiences as past TMA chapter presidents.
Paul Musser (00:11): In this episode of the official podcast of Turnaround Management Association’s Chicago/Midwest chapter, we are honored to have not one, but two guests, Harold Israel and Jack O’Connor. Both Harold and Jack are partners in the financial services and restructuring group at Levenfield-Pearlstein (LP). Their law practices focus on representing debtors,asset purchasers, creditors, and creditor committees in workout and reorganizations throughout the country. These representations include both in- and out-of-court engagements that often range from bankruptcies to assignments for the benefit of creditors to receiverships.
Both Harold and Jack are also past presidents of our Chicago/Midwest chapter. And Jack has the distinction of being my very first guest when I started hosting the podcast in 2024. Welcome to the podcast, Harold and Jack. Thank you for joining me today.
Harold D. Israel (01:00): Thank you, Paul, much appreciated. Thanks for having us.
Paul (01:04): Harold, let’s start where I always do in the podcast. What led you to a practice in restructuring?
Harold (01:12): I fell into it by accident, to be truly honest. I was an accountant in my first life and went to law school thinking I’d do corporate or tax law. Tax law was not my specialty, and I kind of found my way into the bankruptcy area through my professor at the University of Illinois. And my first job out of law school was clerking for the bankruptcy court, Chief Judge John Schwartz.
Paul (01:40): And Jack, what brought you to a practice that focuses on restructuring?
Jack O’Connor (01:45): So, when I was in law school, I knew I was interested in commercial matters specifically, but didn’t have a specific direction. And at the time, when I was a second-year student working in the Career Services Office, I was connected to a professor who had recommended me for an externship with, at the time, Judge Black, who was the Chief Judge in the Northern District of Illinois. And I spenta semester externing for Judge Black and at the same time took a bankruptcy course, “Secured Transactions,” and was serving as the research assistant for the professor who recommended me, and ended up just really loving it.
The issue that I worked on that hooked me was a Chapter Seven with a bunch of different fraudulent transfer allegations being made by a trustee trying to unwind a bunch of different entities and family trusts, and working on that was really engaging and interesting andset me on my path.
Paul (02:45): Yeah, fraud is always a fascinating thing. What humans are capable of is really, truly extraordinary sometimes. Harold, for those of our listeners that aren’t familiar with Levenfield-Pearlstein, can you give them some background on the firm, your practice group and the market it covers?
Harold (03:04): Sure. So Levenfeld Pearlstein is about a 115-lawyer, full business law firm. Our two largest groups are corporate and real estate, and we also have an extensive trust and estates group. And then we have a number of other groups, including employment, environmental and intellectual property. Where Jack and I practice is in the financial services and restructuring group; they have put what we call the “front end” and the “back end” together in one group so we can service our clients from, like we say, “cradle to … ,” I don’t like to say “grave,” but “exit transaction.”
Paul (03:45): I’ve been thinking about it as the circle of life.
Harold (03:47): Yes, exactly. Exactly. So that’s kind of where we fall in. Our core restructuring group is five attorneys, but we probably have at least another five to eight litigators and corporate people that have experience in the restructuring area. And that doesn’t even account for our real estate group, which has extensive experience in real estate workouts.
Paul (04:12): When we were preparing for the podcast, I thought of the main theme almost as “to file or not to file, that is the question.” But to set up that main topic, I wanted to talk first about how the practice of law in our space has changed over the years. When we talked about the introduction, I noted that Kat and we talk about our group as being a restructuring group. And before that, we were a restructuring and insolvency group. And your group is a financial services and restructuring group. So, Jack, what does it say about our area of the law that the word bankruptcy is not a part of the title of our practice groups?
Jack (04:53): Well, I think it speaks to the limits that probably just putting “bankruptcy” on a title leads to, because restructuring encapsulates a spectrum of potential options, right? So that’s always one of the challenges. If I’m talking to somebody who doesn’t know what I do on a day-to-day basis, I usually will tell them I’m a bankruptcy lawyer. But really, when I’m talking to somebody who is a little bit more sophisticated or knows a little bit about the industry, I’ll say I’m a restructuring attorney because then that opens up more than just bankruptcy, right?
And frankly, to your question in terms of like how the practice has changed over time, I think, and this will come as no surprise to anybody, but restructurings, workouts, out-of-court solutions are far more preferable in many situations to clients than an actual Chapter 11 filing and going through a formal process, simply based on cost, most of the time. But I think that we’re not trying to hide the ball that we practice in bankruptcy court, but we are trying to let the world know that there is more than one option when you’re talking about an insolvency or a distressed situation.
Paul (06:02): And then Harold, to tease that out a little bit more, how has being a restructuring or a bankruptcy lawyer changed over the course of your career? I mean, are there different types of cases, transactions or activities that you do more or less of now than you used to do in the past?
Harold (06:19): Well, when I first started, there was definitely an emphasis on using bankruptcy as a restructuring tool as opposed to a tool to sell assets. I think, overwhelmingly in today’s world, when a company files for bankruptcy, the likelihood is that they are going to get sold in one way, shape or another. We’ve seen a few large restructurings this year to kind of go against that tide, but that’s still a minority for most bankruptcy cases.
And I think what’s really driven it, and Jack alluded to this, is cost. Bankruptcy has become very, very expensive. It’s become more litigious and it’s really something to be avoided. As we often tell our clients, the first question we get when we get an intake call is, “I need to file bankruptcy because …” And our usual response is, “Well, let’s break that down a little bit,” because bankruptcy is very good for the attorneys in the world, but not the clients. Since we’re in the client service business, we’re going to try and find a non-bankruptcy alternative for you.
Paul (07:27): So, when we met in advance of the podcast, we decided to focus on these different options that exist for companies that are experiencing serious distress or, at some point, believe that they soon will be experiencing some serious distress. They’re kind of at a proverbial crossroads or inflection point. Jack, at a high level, what factors or considerations are you taking into account when you, as their lawyer,are trying to advise them on the best path forward for a distressed company?
Jack (08:01): The first thing, and I think this is true for all restructuring professionals, is how early did you get to us? Because the earlier a client comes in the door, the more likely they’re going to have a good range of options. And then starting from there, let’s say we’re early in the process, and we have a full menu of available options to us.
Then we’re looking at … what are the factors actually causing this distress? Is it a large judgment that the company is not going to be able to pay and needs to reorganize around that? Is it because the market conditions have become such that there’s just not a profitable business that can sustain whatever debt service they’re supposed to be servicing? Other factors like whether management is ready to continue or retire is a big factor as well. So, we’re taking a really holistic approach in terms of our first conversation with a client, understanding who their lender is and what their collateral looks like.Things like the number of employees that they have and how that may be affected by a restructuring process. So, it’s like I said, it’s a holistic conversation coming in so that we have a better understanding of exactly the lay of the land so that we know what kind of a solution we’re going to be looking at.
Harold (09:17): And to build a little bit on what Jack said, is really asking the client where they want to be at the end of the day. Because we have clients that are ready to sell or retire and get out of the business, and we have other clients that really want to stay in the business. And what that goal is, is critical, when taking into account everything Jack had to say to fashion the best path forward.
Paul (10:15): Sometimes a client might come to you asking for essentially a corporate burial or a liquidation. So, for example, a company may be behind on its payments to its secured lenders, as well as its other trade creditors. Maybe they can’t pay their debts as they’re coming due.Maybe they’re facing a liquidity crisis where they’re not sure if they’re going to be able to make payroll. And in those situations, it’s pretty unlikely that there’s any real value in the equity and the secured creditors might be heavily under secured, which, for those audience members that aren’t familiar with that term, means that the collateral supporting the loan is worth less than the debt.
Jack, what are the liabilities that the company and its board should be concerned about in this scenario as you decide a path going forward?
Jack (11:15): That’s great question. One of the first things, if we’re talking to the board of directors in that capacity is what’s your DNO coverage look like? So, obviously a strong directors and officers policy is going to be important for those folks in particular, because in a lot of liquidating situations, you’re going to see a trustee or some fiduciary come in and want to investigate what happened before they were put in place. So that may mean youpursuing insurance policy proceeds.
But more than that, it’s also understanding and educating the board on their fiduciary duties to creditors and how that may be shifting when we’re talking about an insolvency scenario. To put it very briefly, boards’ fiduciary duties will shift in an insolvency situation instead of being beholden just to shareholders. They’re now also beholden to creditors, because creditors are potentially out of the money. So those are a couple of the things that we’re talking about with respect to the board, making their decisions and understanding their options.
And also, if we’re walking through that conversation with equity or management, we’re talking about what does it look like in terms of having either a third party come in and take control in the form of like a trustee and an ABC and AFSCME or continuing the business and running a controlled liquidation, for example, whether that’s through a Chapter 11. They can be run as a controlled liquidation process if we have good collateral and consent from the lender. Beyond that, I don’t know if there’s anything that Harold would add.
Harold (13:02): I think the one thing I would add, and going back to the beginning of Paul’s question, is where value is critical in the decision-making process. If the board is faced with a lender that’s under-secured significantly, it makes it a little easier, candidly, because they don’t have to worry as much about other creditors, because a secured lender is not going to get paid.
An orderly wind-down or Article 9 sale makes a lot of sense. However, when the collateral value starts to creep up to about the same as the secured lender’s, then it gets more difficult. Because a concern is that a creditor could come in afterward and say, “You did not do everything to maximize value.” And as Jack said, you owe the duty for us to do that. In those situations, you may want to have a third-party process, like an assignment for the benefit of creditors where an assignee sells the assets. They may get the same price, but just having that process gives the board additional protections when unsecured creditors are not paid in full.
Paul (14:17): Going back to the fact that in the distant past, we were all described as being part of bankruptcy practices or bankruptcy attorneys or what have you … what are the arguments then against filing a Chapter 7? Aside from … well, maybe it’s even less of an issue with respect to price … but why are clients coming in asking for a 7? And a lot of times you all are saying, well, maybe that’s not the best idea, Harold?
Harold (14:45): Well, one factor is, if you’re a board of director and you go on to serve other roles, you often have to have a questionnaire. Have you ever been the owner or on the board of directors that has a company that files for bankruptcy? A lot of people don’t want to have to check that box. The other reason is, and Jack alluded to this earlier, it’s a public process. That means you have a trustee or the US government over checking what you’ve been doing the last three or four years. And it may be, three years ago, the company was doing great and they made corporate dividends and paid shareholders. And that may have been fine at the time or maybe it wasn’t so good at the time. And many companies don’t want that third person kind of doing that investigation. And they view it as kind of an unnecessary step when it’s clear that there’s no value or candle leaf, or they did something that they might not want others to discover.
Paul (15:53): They know what they did in the four years preceding the filing. Yeah, I find avoidance actions are really one of the biggest things, right? Which is, they’re concerned about what type of claims might be brought. And it’s just much better, if at all possible, to have some type of out-of-court process where you’re not bringing in somebody else to control the company and to control those potential causes of action. And sometimes it makes for a cleaner break, which is a little bit counterintuitive. You would think that if you go through a court process, you get an order at the end of it. It makes for a nice clean break, but at least this limits your time, limits your liability and limits the spend.
Jack, are there any factors that could mitigate in favor of filing a 7? Are there times where folks show up and you’re just like, listen, we’ve considered all of our options and it seems like actually a Chapter 7 is the best outcome, or it’s our preferred course in this particular case.
Jack (16:53): Yeah, so I’ve had some limited experience where a Chapter 7 has actually made sense. To describe generally what a scenario might look like would be a business that has a short track record potentially, and is filing because it has no literally no assets, and the likelihood of potentiallitigation being brought against principles, or clawback litigation being filed, is fairly low. That said, there could also be situations, for example, in the sale of a business where the seller entity sold substantially all of its assets and is simply remaining with whatever unsecured claims may be brought against it, etc. And so, if litigation starts to pile up, maybe the best path forward is to file a Chapter 7 for an entity like that, simply to get the benefit of the automatic stay, where there may be some assets a trustee may be able to administer.
But the situations are rare, like we talked about. It really is when you have a business with no continuing interest or no enterprise value going forward, and really no real risk of potential litigation claims that would be harmful to either existing creditors who were potentially subject to preference clawbacks, or insiders who would also be potentially subject to those same kind of clawback claims.
Paul (18:26): Harold, let’s go back to you. You had described a situation where maybe valuation is a little bit more “cuspy,” where we’re not sure, at the end of the day after a sale process, if the secured creditors are going to get paid in full, and maybe there are other trade creditors out there who will argue about it, essentially. What are some of the considerations and potential liabilities that you need to walk your board or the company through when making decisions on that next step in those “cusp” evaluation situations?
Harold (19:02): Right. So, the board is protected by the business judgment rule, just like it is in any other situation. And the question is, “How did they exercise that business judgment?” One way in these types of situations is to actually hire an investment banker to market the assets. And if they go through a marketing process and determine value, that is something that the board can rely on.
Another is just hiring a valuation firm, right? You get a third-party opinion of value. Now, you want to make sure that the valuation firm is experienced in valuing troubled companies. It is otherwise expert, just like anything else. But most importantly, you just want to go through a detailed decision-making process. You want to make sure your minutes reflect that you went through that process and that you had a good-faith belief based on the legal advice that you were given. And the advisors, which you’re entitled to rely on, that this transaction is in the best interests of the company. And that can be whether it’s a bankruptcy, a sale, an Article 9, even a deed in lieu of foreclosure. You just have to do your homework. Simply relying on management or even counsel that does not have restructuring experience can set you up for exposure down the line.
Paul (20:30): Jack, Harold talked about some of the different options. What are the most likely process options at your disposal in this sort of “cusp” evaluation situation? And what are the advantages and disadvantages of some of them, just at a high level, that people should be considering?
Jack (20:45): I would think, most likely, the two options we’d be looking at are probably an Article 9 sale, which again, with this “cusp” evaluation issue, would probably be thorny. Or an ABC, an assignment for the benefit of creditors, where the company takes all of its assets and assigns it into a trust, and the trustee of that trust, which we refer to as an assignee,administers those assets and helps to inoculate insiders or other claims from being brought against the company during the period when the assignee is in control — and can then sell the assets of the business, for the most part, free and clear, not as strong as in a bankruptcy proceeding — but can sell those assets and then keep the liabilities with the trust that’s been formed. So, at a high level, those are probably the two main options that we’re looking at.
And like I said, Article 9 … because if we’re talking about a quote — unquote “cuspy” situation where the value of the collateral may not exceed the bank’s debt, the bank may not be super excited about an Article 9 sale where they foreclose on collateral and then have to hope that they’re going to get paid in full, or not be paid in full and then run the risk of other potential claims being brought in that scenario.
Harold (22:08): And just to build on what Jack had to say, I think they have to take into account that the bank may ask for a receiver to be put in. Under the new Illinois Receivership Act, which is in many ways designed to mirror the bankruptcy code in certain aspects, it does allow a receiver to sell a business and take restructuring steps that may be forced upon the company.
The company could agree to the receivership. It’s just something else the board has to consider in a restructuring-type of situation. The Act just went into being a few months ago in Illinois. We haven’t seen too many tests of it yet, but we anticipate they’re coming.
Paul (22:53): Yeah, I’m anticipating that it will help to establish Illinois even further as a great jurisdiction for folks to bring those receivership actions. And it is a nice midway point between an in-court action, but it’s not the full expense and process, and what have you, as filing a bankruptcy. And it seems to me to be a place where a lot of times parties are able to agree that this is the right process to have, to essentially go through a sale and at the end of it, dispose of essentially the company.
So, we’ve talked a bit about traditional Chapter 11 reorganizations as being too expensive to make sense for distressed middle market companies or lower middle market companies that want to reorganize. But let’s frame the question in a slightly different way. Harold, when might a traditional Chapter 11 reorganization make sensefor a middle market or lower middle market company?
Harold (23:56): To effectuate a plan that’s done in advance of the bankruptcy, where you have creditor support in line for the bankruptcy, and you can get in and out relatively quickly. That could take several different forms. Kind of the best and most efficient, it’s what’s known as a pre-packaged bankruptcy, where the creditors have actually voted in advance. We don’t see that too often in the smaller middle market, but what we do see is a pre-arranged bankruptcy where the company has obtained the support of key stakeholders and then solicits the votes after the bankruptcy case has filed.
And you effectuate this restructuring, whether it’s getting rid of burdensome contracts or reducing debt, and you do it quickly. That to us is key, and you often do it when you just need the benefits of the bankruptcy, right? What’s a big benefit of bankruptcy? You have an overly burdensome lease, and you can’t escape the burden, right? That’s a great reason to file because you have a business that works, you move to a different location, and you’re not burdened by the lease liability or a big litigation judgment. And you have the support of trade creditors, for example, and the lender. And you basically have all your ducks in a row. That’s when bankruptcy can work extraordinarily well.
Paul (25:24): And then just from a timing perspective, in your experience, Harold … what does that do to the expectations as far as being able to get you in and out, versus, I don’t want to say “a free fall,” but an “unplanned bankruptcy.” where you’re really going to have to duke it out at the beginning of the case on a path forward?
Harold (25:44): Well, it’s really jurisdictionally dependent. There are certain bankruptcy court jurisdictions that will allow a very fast-track bankruptcy. And there’s others that would like to see the process play out a little bit more, even if it is prearranged. But we’d say, we manage the expectation to say at least 90 days to get in and out of bankruptcy, even if it’s completely consensual. Now, can you move it up faster? Obviously, some folks have done it in a day. But also, there’s an increasing trend towards having a planned disclosure statement hearing on the same day, and just getting conditional approval of the disclosure statement early on in the case. That can knock 30 days off the process.
So, there are ways to do it, but given that you are kind of at the back-end of a judge and an unnamed creditors committee, we usually tell our clients that the best case is 90 days, and we can work up and down from there.
Paul (26:49): Yeah. And if you can get enough agreement where a committee doesn’t show up, then that really helps to condense the process and really be able to present a picture to the court that everybody really is rowing in the same direction. So, let’s get out of here as quickly as possible.
Jack, when and how does Subchapter 5 change the analysis here when compared with the traditional Chapter 11 process?And maybe just give our audience a little bit of a description of what we’re talking about when we say Subchapter 5.
Jack (27:24): Yeah, so Subchapter 5 is a subset, a specialized type of Chapter 11, intended for small businesses. The key difference between a Sub 5 and a, what I guess we’ve been talking about as a quote — unquote traditional Chapter 11, is that equity can ride through. There’s no absolute priority rule in a Sub 5 bankruptcy proceeding, but it’s only available to companies who have debt, and they get secured and unsecured debts of less than about $3.7 million, I think is the number right now. It sounds like there’s legislation that is maybe reignited and working its way back through Congress that will raise that limit back up to $7.5 million, which we saw during the pandemic, and was taken advantage of by a lot of businesses. I will say, like Harold and I filed a debtor right before that limit went back from 75 down to the$3.7 million, specifically to take advantage of Sub 5 for that client, because otherwise they wouldn’t have been a fit for an 11. They wouldn’t have been able to afford the cost. And so, when we’re looking at Sub 5 as an available tool or option, we love it if we’re representing a debtor because it means that we’re able to take a company relatively quickly through a Chapter 11 process that will then retain equity without having to payhundreds to unsecured creditors. So, in that analysis, if a company fits, it’s a much more viable option, in my view, in terms of being able to take a company through a process where equity and management want to stay in place, and there’s a viable business at the back end of it.
Paul (29:12): Yeah, the issue of control, I think, is a really important one, and equity being able to keep their seat at the table at the end of the process. Otherwise, you’re forced to try to come up with some type of new value plan, which, in my experience, becomes heavily contested and just increases your stay and the expense of the bankruptcy on top of it. You actually then have to find some new value from somewhere to contribute, which may be problematic depending on what kind of financial shape you’re in when the filing happens.
Harold, Subchapter 5 is of a relatively recent vintage, and there was a lot of fanfare that it would be faster, cheaper and more efficient form of restructuring, especially for small businesses. Has Subchapter 5 fulfilled that mission in your opinion, and are there changes or tweaks that could be made to make it even better?
Harold (30:09): Well, I would say it depends. There have been cases that have worked out, but there are plenty of Subchapter 5 cases that have had just as much litigation and issues as what Jack calls “regular” Chapter 11 cases. Because, you know, the problem with Subchapter 5, what I have found … leaving aside everything else … is what is disposable income, right? Andit’s a term that’s not defined, and it is readily subject to creativity, we will say, in determining the financial picture of the debtor.
And so what gets included in that could ultimately result in very little recovery for the creditors, which means they’re enticed to litigate because why should the company be allowed to budget 20 percent of their revenue forcap backs and not pay us anything, for example. So, there’s lots of ways to, again, manage what that disposable income is. And I think, adding clarity to that … I don’t know, I don’t have a suggestion … but adding clarity to disposable income, I think, could solve a lot of Subchapter 5 problems. That and getting rid of the requirement that it be a three- or five-year plan … it should just be a five year plan, unless you’re paying everybody in full faster.
Paul (31:37): And then, I think obviously, the threshold limit. You’re down in the $3 million range, it really limits the availability of this tool to people. Even at $7 million, it makes it tough to really get substantial businesses through. So, I think at one point, wasn’t there a discussion about trying to get it over 10?
Harold (32:03): There was, and it didn’t work out. But you hit on another key point that, and defining what debts count towards that limit, whatever the limit is, because they have to be real debts, non-continued debts. And there’s been litigation over what debts should and should not count that, for example, has allowed a few very large companiesto try and file Subchapter 5, because they allege that all their debts are potential litigation claims that have not matured so they don’t count toward a limit.
Paul (32:42): One of the hallmarks of any good attorney on any side is a little bit of creativity, right? And trying to figure out a way to optimize the options for your client. So yeah, no matter what, there will always be some form of litigation and some form of testing where the boundaries of these different options are at the end of the day.
Well, let’s pivot and talk a little bit about your involvement, both of you, in TMA and just some business development tips for folks. As I mentioned at the top of the show, we have not one but two former TMA chapter presidents on this episode. Harold, can you describe your TMA journey, the path to becoming a chapter president and your involvement in the organization throughout your career?
Harold (33:28): Sure, so I have been involved for almost 30 years. I was encouraged by Chris Horvay, may his memory rest in peace … he was president of the TMA and encouraged me to be involved. And that’s where I started my TMA journey, and I served on tons of different committees and task forces before a number of TMA leaders — too many to talk about — but it basically encouraged me to take the next step and become TMA president of the Chicago chapter, which was great.
And then I used that experience and served on the TMA global executive board and board of directors for a number of years, including being the education vice president.And for business development, it’s been fantastic. It’s been the core of my business development, relationships I have made through the Turnaround Management Association. But they don’t happen overnight. It’s years and years of involvement. It’s working on committees because you have the advantage of working with folks you might not always work with. You may work against them or they may be like financial advisors who, you don’t really have another way of working with them, except through the TMA. And so, it’s really allowed me to broaden who I know and the experts that I get to surround myself with on a daily basis.
Paul (35:02): Yeah, I feel like committee work is a great way to meet more people and to work with them in an environment that’s lower stakes than actual paid work. They get to see you, they get to see how you interact with other people. And still, they get to see what you’re able to produce at the end of the day. So, it becomes a great networking and marketing tool, just beinginvolved and active and showing that you’re someone who’s going to do what you say you’re going to do at the end of the day.
Being a chapter president involves dedicating a considerable amount of time and energy to a volunteer role. There are meetings, events and conferences, on top of getting even more emails and calls to an already busy schedule as a practicing attorney. So Jack, why was it importantto you to commit the time and energy necessary to become and then lead as a chapter president?
Jack (36:06): Yeah, so I was president-elect when Kat Parker was president of the chapter, and she had asked me if I was interested. I had been involved with the chapter for quite a while at that point and had, like both of you have said, done a lot of committee work and served in different VP roles, and it was something that I looked at as an act of service to give back to the chapter that’s been giving lots of opportunities and lots of education and connections to me. And so that’s the thought I went into it with, which is if I can be of service to the chapter in this way, that’s what I would like to do. And it was a great experience.
It’s also, from a selfish standpoint, your name is out there and your face is out there on lots and lots of things. So, it’s a great way to be exposed to the rest of the market. And it also lets the market know that you’re serious about what you do and that, like you said, Paul, that you’re a person who does what they say they’re going to do. And that’s one of the things I love about working in TMA in particular, is people I don’t have an opportunity to always work with or be across from, I get to see how they work when we’re in a volunteer situation, when we’re in a service situation. I think you can tell people’s commitment to the profession and to the industry, the way they show up for things like TMA.
Paul (37:29): So, both of you have been incredibly active in TMA, and I know your partner at LP, Lisa Vandesteeg, is likewise incredibly involved in organizations like ABI. Why do you think it is that partners in your financial services and restructuring group dedicate so much of their time to professional organizations? What is it about the culture of your firm and that type of involvement?
Harold (37:53): We have a very entrepreneurial firm to begin with. And so that does encourage us to get involved in organizations. And our colleagues and other practice groups are also very involved in organizations as well. And the reason is, we are really a referral-based business, especially if you do kind of debtor work, S&E (Science & Engineering) work, creditor committee work. It really does depend on a lot of the opportunities that arise through your connections.
If you’re representing secured lenders, then you have a stable form of clients. Bank A is going to come to you, and you don’t have to worry as much about getting your name out there. But doing what we do, it’s a great way to stay in front of people on a regular basis.
Paul (38:41): Harold, let’s talk a little bit more about business development as an attorney. I think that when we went to law school, the idea of winning business may not have been front and center in our minds. It wasn’t necessarily anything that was taught in law school either. But as our careers developed, it became increasingly important to develop and grow our individual law practices. So, can youtalk about developing a mindset for business development as a lawyer and the steps that you’ve taken to try to establish and grow your practice?
Harold (39:17): Number one is obviously being technically good, because that in and of itself can help build your business because you’re working with other lawyers all the time. Sometimes they’re next to you, sometimes they’re on the other side. And if you do a good job, they become your referral sources. Because we all know conflicts are part of what we do. And one way to build it is doing excellent work.
The other part, which they really should, to your point, Paul, teach you in law school, is networking should start on your first day of law school, if not before, right? Because your future classmates are sources of business. Throughout my career, I’ve both received referrals from classmates and given them. And sometimes it can be 10, 20 years later. And so, I always tell younger lawyers, especially in our summer associate class, to get to know the people in the classes above you, and get to know the people in the classes below you. Because the more people you know, the better chance you are going to have at developing business.
And then it’s getting out there, right? And it’s getting out there with something you’re comfortable with. If you hate speaking in front of people, that’s okay. You don’t have to speak, right? You can write articles. You can post on LinkedIn, right? There’s lots of different ways to develop business. The important thing is: doing it if you’re comfortable with it. Whether that’s going to ball games or going to plays or going to theater, it’s meeting your potential clients where they are and what they’re doing. And there’s certain things that, you know, you’re not comfortable with, right? I mean, if you hate sports … taking a client to a baseball game is not going to help you very much, because they’re going to see you’re not interested. They may be big sports fans, and going to start talking statistics and strategy, and you’re going to not have much to say, right? So, it’s really finding the things that you have in common with your clients and developing that network. And it’s constantly evolving. And sometimes it’s a mix and match of everything, going to conferences, writing articles, doing well. I think all three of us do so, very candidly.
Paul (41:39): Harold, I love the advice on essentially being authentic, right? Like leaning into who you are, what you’re interested in, and then trying to find those connections to maximize that. I think that authenticity is something that people really value. They want to know who you are. And they want to see you, at the end of the day … not like some presented, manufactured version of yourself, but your true self.
The more you interact with people, the more that’s just going to become obvious. So, if you can make connections, being your true self, those connections will only be stronger at the end of the day and serve you much better.
Jack, any broader business development tips or advice that you can share with our audience, particularly those for professionals that are looking to grow their practices or maybe are at the initial phases of their restructuring career?
Jack (42:38): Yeah, like Harold was saying, even getting to know your law school classmates … but if you’re a younger person at the front end of your career, the next gen committees, both at the chapter level and the global level, that’s how I started building my network as a junior restructuring professional, getting very involved. Frankly, people at the chapter notice the young people who are getting involved and are doing things that are either innovative or energetic, etc. That’s a great way to make a name for yourself.
I also try to remind myself — despite the pressure to bring in business or to find new work and, you know, land the next deal, a lot of marketing and business development is the fun part of our job a lot of the time, where it’s, “No, I have to go to a cocktail party?” That’s not the end of the world. It’s “I have to go to a fancy dinner withprospective clients or networking connections?” The flip side of that is I get to go out with friends of mine that I like to see and would love to work with professionally. So, I think that reminding myself or reminding others that this is the fun part of the job is getting to spend time with people who understand what it’s like to be a restructuring professional. And that’s a unique thing.
Paul (43:57): Right, or having conversations like we’re having today, right? That’s one of the fun perks of being able to do this job. The fact that we happen to be taping this for a podcast, I mean, it’s just sort of using that experience to try to market ourselves and get our opinions and our ideas and our personalities out there into the world.
Thank you both so much for joining me on the podcast today. Our guests for today were Harold Israel and Jack O’Connor from Levenfield-Pearlstein. Thank you, listeners, for tuning in. I’m Paul Musser, and this has been an episode of the TMA Chicago Midwest Podcast.
