Crescent Cove Advisors Takes Equity Stake in Kingsley Gate Partners

Private equity firms continue to pair up with executive recruiters at a blistering pace. High growth rates, new layers of incremental revenue streams, and AI-powered talent intelligence tools aimed at revolutionizing the recruiting sector are creating a perfect storm for PE investors who now view search firms as an investment of choice. The latest: Crescent Cove Advisors has taken an investment stake in Kingsley Gate Partners. Let’s take a closer look.

February 2, 2022 – Kingsley Gate Partners has secured an investment from Crescent Cove Advisors, a multi-asset investment firm focused on technology investments. The equity partnership is expected to fuel the search firm’s growth through global expansion and accelerate a push into talent acquisition AI-enabled software. Umesh Ramakrishnan, one of Kingsley Gate Partners’ co-founders, has been named CEO. “First, I want to thank my co-founders Nancy Albertini and Buster Houchins,” said Mr. Ramakrishnan. “We would not be at this exciting juncture without them. The partnership with Crescent Cove Advisors is a testament to the value that Kingsley Gate Partners has created in just a little over six years. This partnership will ensure that we will continue to disrupt this industry through innovation, continuous improvement of the search process and further attracting world-class talent.”

Kingsley Gate marks the first private equity investment for Crescent Cove and expands the firm’s capital solutions for founder-led technology companies. “As organizations are reshaped during and post-pandemic, we are excited to partner with the Kingsley Gate Partners team and support the company in redefining executive recruitment through the use of technology-driven solutions,” Jun Hong Heng, founder and chief investment officer of Crescent Cove.

“The global executive talent management industry is large and growing, yet little has changed in how companies approach talent acquisition,” said Andrew Holmes, partner and head of private equity at Crescent Cove. “Umesh, Nancy, Buster and the talented team at Kingsley Gate Partners are recognized leaders in developing proprietary and differentiated technologies to help its global client base improve the speed and accuracy in their hiring processes. We cannot think of a better time to make this investment given today’s global talent shortage and the premium companies place on talent acquisition. We are honored to join as partners in this exciting mission.”

Improving Efficiency

“High growth rates, new layers of incremental revenue streams, and AI-powered talent intelligence tools aimed at revolutionizing the recruiting sector are creating a perfect storm for PE investors who now view search firms as an investment of choice,” said Scott A. Scanlon, Hunt Scanlon Media co-founder and CEO and leader of Hunt Scanlon Ventures, the company’s M&A platform. “Over the next 18 months, I doubt we will see a single search firm of significance standing without having merged, been acquired, or taken on sort form of private equity investment. Savvy recruiting leaders are lining up financial and strategic partners now to prepare for the coming onslaught of growth and expansion,” he noted.

Mr. Scanlon said that an early analysis of statistics pouring into Hunt Scanlon from hundreds of search firms the company tracks are showing monumental growth rates for 2021. “The problem everyone is talking about now is capacity,” said Mr. Scanlon. “How can search firms serve the expansive talent mandates of an ever-growing roster of clients? It is a big concern that we believe can only be answered by improving efficiency – and that means more focus on artificial intelligence and data-driven recruiting solutions. That is at the heart of this investment with Kingsley Gate as it has been with so many of the others our ventures team has been involved with over the last 18 months.”

The Right Time for Growth

“We had spent a little over five years building the foundation for a tech-enabled global services firm – with over 10 proprietary digital products, Synchronous Fit (our new search framework), and passionate consultants that supported that evolution,” Mr. Ramakrishnan said. He said Kingsley Gate is now ready to scale the firm to a size that would disrupt the 50-year reign of the SHREK firm domination.

“To do this, it was important to find the right partner – not just one with an appetite to invest in a large global expansion on a progressive platform, but one that was aligned with our vision of what search should look like today. We spent over a year on that journey, and once we found Crescent Cove, we knew that our search was over. We are ready.”

Andrew Holmes is a partner at Crescent Cove and leads private equity strategy for Crescent Cove Advisors. He has more than a decade of experience in private equity across a broad range of industries, including business services, technology, media, industrials, and healthcare. He is responsible for all key aspects of the investment process, from originating new investments, diligence, deal execution to working alongside the firm’s partner companies.

“Andrew Holmes and Jun Hong Heng both believe that an industry that has seen little meaningful change in half a century is ripe for disintermediation,” said Mr. Ramakrishnan. “After months of stringent due diligence, they found that our roadmap, our digital assets, the quality of our consultants and an enviable global client roster provide the ideal foundation for a disruptor – one that enhances the services of our consultants with real-time digital assistance from the beginning of the search till after the candidate has been placed in a role.”

Crescent Cove, a multi-asset investment firm focused on technology investments and dedicated to supporting entrepreneurs and founders, was founded just six years ago. The firm leverages its global network of relationships and unique insight across markets, emerging industries, and technologies to build businesses and accelerate value creation across its portfolios.

Founded a year earlier, Kingsley Gate Partners recruits senior leadership for private equity and venture capital portfolio businesses and Fortune 100 companies. Headquartered in Dallas, it employs consultants and recruiters with expertise in private equity, life sciences, financial services, technology, manufacturing, and professional services. Kingsley Gate has completed searches with over 1,400 clients in 32 countries – a substantial lift from its humble beginnings in 2015 when three people gathered around Mr. Ramakrishnan’s kitchen table to plot strategy.

A Game of Musical Chairs

Jeff Becker, managing director and head of M&A – North America at New York-based investment bank Equiteq, said that private equity firms began to show strong interest in the executive search sector a few years ago “as a way to invest in the macroeconomic tailwind theme” of the ongoing war for talent. “After a brief cool down period at the onset of the pandemic, PE is now leaning further forward into the sector due to a few factors,” he said.

Among them: Many search firms survived the ‘downside case’ of the pandemic and are now growing at even faster rates as the economy snaps back and the industry grapples with the pent-up demand as a result. “Search firms also have been successfully diversifying into adjacent areas such as professional interim staffing and leadership consulting,” said Mr. Becker, as well as outplacement, culture transformation, coaching, HR advisory, DE&I consulting, and talent assessment. Each adjacency can be its own standalone, multimillion platform.

Related: Executive Recruiters Get Back to Business

Mr. Becker also said that further acquisition and consolidation opportunities are plentiful “as the game of musical chairs among industry players” gets fully underway. “We expect private equity firms to continue to be interested in the sector for years to come,” he said.

Linking Talent to Value

One such private equity player who jumped into the fray was New State Capital Partners, based in Larchmont, NY. The firm took an equity investment stake in Horsham, PA-based Klein Hersh International, an executive search firm focused on the life sciences and healthcare industries. For John Beauclair, a senior principal at New State Capital who helped drive the deal, the link between talent and organizational value could no longer be overlooked from an investment standpoint.

“Private equity firms have started to realize, and to see first-hand, that competition for superior talent is a key driver in their investments,” he said. “So, we already understand the value when looking at search firms. Innately, we see the value of the recruiting industry and we are buying into the growth that is coming with it.”

In the case of Klein Hersh, New State Capital saw markets unimpacted by economic cycles – especially life sciences and pharma services, industries where talent is critical and harder to find. “For search firms,” he said, “understanding your space is a key differentiator” when seeking to attract a private equity sponsor. Private equity firms circling the search sector, he said, “is good news now, but unbelievable news for the future.” Investments made today into growth, technology and people, he said, will only make for a more stable and dynamic sector in the long run.

LLR Partners, a private equity firm based in Philadelphia, made an investment last year in Haddonfield, NJ-based True, a global executive talent management platform. The partnership is aimed at developing and expanding innovation within the talent space. LLR Partners, which has raised more than $5 billion to fund investments across the technology and healthcare sectors, is said to have bought into True’s mission: to disrupt a stagnant industry in desperate need of tech-driven talent solutions.

“They expressed interest and we were compelled to listen,” said Brad Stadler, True co-founder and co-CEO, “even though we were not looking for a financial partner. “Through our discussions, we quickly became aligned on how they could operationally and strategically support our long-term vision.”

What resulted soon after the investment: bolstered with capital, True made the first acquisition in its history, acquiring clean-tech search leader Hobbs & Towne.

Related: Hunt Scanlon Media Launches M&A Advisory Service for Recruiters

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media

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