DHR Ramps Up Pressure on CTPartners

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May 13, 2015 – March 13, 2015 — A substantial roadblock has been lifted now that CTPartners Executive Search Inc. (CTP) CEO Brian Sullivan is no longer in the picture, but DHR International Inc. is still waiting for the executive search firm’s special committee to converse with it about its takeover offer.

Chicago-based DHR has at the same time increased pressure on its rival–revealing plans on Thursday to elect a slate of six members to CTPartners’ board while it continues to amass shares in the company. But it still looks a though getting a deal done won’t be an easy task.

“We remain very committed, optimistic and anxious to get the deal in front of the committee,” said Geoff Hoffmann, chief executive of DHR International, in an interview on Friday. “We think that our offer is the best alternative to shareholders at this point.”

At $7 a share, DHR’s Feb. 6 offer values CTPartners’ equity at about $61 million, based upon its approximately 8.7 million shares outstanding.

Mr. Hoffmann said he had anticipated Robert W. Baird & Co.–which is advising CTPartners on its strategic alternatives process including DHR’s offer–to deliver its report to its special committee by the end of this week, but as of Friday morning he hadn’t heard anything.

Further delay could be tied to the fact that CTPartners also announced on March 12 the resignation of chairman and CEO Brian Sullivan, effective April 2. The company’s vice chairman Sylvain Dhenin has been appointed to replace Sullivan as chief executive while the company searches for a new non-executive board chairman.

Sullivan, who has been at the helm of the C-suite headhunting firm since 2004, was among the group of top executives under the gun in recent months. As early as December, reports by The New York Post depicted CTPartners as a “boys club”, detailing confidential complaints of sexual impropriety and sex-bias including certain charges aimed at Sullivan.

“I think Brian wanted to improve the situation so the company wouldn’t have to be acquired; obviously that did not work out,” said Scott Scanlon, chairman and CEO of Hunt Scanlon Media LLC, a market research firm concentrated on the retained search, HR and talent acquisition industries. “Now with the CTPartners CEO out of the way, a major barrier to getting a deal done has been lifted. You’d think the special committee would at least entertain DHR’s offer more seriously.”

Still, Mr. Scanlon doesn’t think CTPartners will hand itself over willingly to DHR, explaining that with Mr. Sullivan no longer in charge the company may feel it can get its financial footing back on track alone.

“CTPartners has gone through a difficult time, but the company had a great year in 2014,” Mr. Scanlon said. “I’m sensing there’s a real dog fight ahead.”

Broadly speaking, the overall executive search industry is growing by about 15%, noted Mr. Scanlon. DHR and CTPartners generated about $155 million and $90 million in revenue in the U.S./Americas region, respectively, during 2014. Mr. Scanlon’s firm estimates the company’s top lines will grow to about $170 million and $100 million, respectively, in 2015.

Despite CTPartners apparent resistance to discuss a deal, DHR shows no signs of backing down. The company said Thursday it plans to elect six new directors to the board of CTPartners while at the same time revealing it had purchased additional shares in the target.

“We continue to acquire shares,” Hoffman said. “We now own around 7.4% of CTPartner’s outstanding stock. That highlights our commitment to a strategic transaction.”

The roster DHR intends to nominate includes William Perez, former CEO of Wm. Wrigley Jr. Co. (WWY), Nike Inc. (NKE) and SC Johnson; William Farley, chairman and president of private equity firm LV Ventures Inc. and former CEO of Fruit of the Loom; William Smithburg, former chairman, president and CEO of The Quaker Oats Co.; John Jastrem, chairman and CEO of Callison LLC and former chief executive of ACME Holdings & Acquisition Corp., Colt’s Manufacturing Co. and other companies; and Daniel Connors, former EVP and CAO of Kinko’s.

“It’s a real all-star cast of potential board members,” noted Mr. Scanlon. “Clearly the Hoffman family is in it to win it.”

While all of DHR’s larger competitors–Korn/Ferry International, Spencer Stuart, Heidrick & Struggles International Inc. (HSII), Russell Reynolds Associates and Egon Zehnder–could hypothetically go after CTPartners, Mr. Scanlon doesn’t think it’s a likely scenario.

“Just from a culture standpoint, I think there’d be such a clash,” Mr. Scanlon said. “I don’t see the private firms needing to do it. Those firms are all doing well, growing by 8- to 10% annually. The other problem: professional service combinations historically haven’t worked.”

DHR is working with Meisrow Financial Inc.’s Jeffrey Golman as financial adviser alongside Thomson Coburn LLP’s Thomas A. Litz and Andrew Klinghammer as counsel, The Deal has learned.

The Deal Pipeline, by Sarah Pringle

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