Executive Recruiters See Growth and Expansion Turn to Fear and Anxiety

June 19, 2020 – For an industry that is all too familiar with the reality of economic downturns, confronting the COVID-19 pandemic crisis is unlike any other. Executive recruiting leaders say they have no idea this time around how extensive or long lasting the damage will be, never mind when business will return to normal. Following is a look back at a spectacular year for the search industry and how the remainder of 2020 might unfold.

Charles Aris started 2020 celebrating what it said was the most successful year in the search firm’s history. Business was up 26 percent year-over-year, with revenues topping $17.3 million. The partnership, with a single office in Greensboro, NC, enjoyed a 73 percent revenue rise over the past five years. During that time, CEO Chad Oakley and his brother Allen, who serves as chief operating officer, added 20 staff to its ranks to handle the steady and growing stream of search work.

Blue Chip Clients, Big Ambitions

Established 51 years ago, Charles Aris is a recruiting industry pioneer focused on senior-level assignments across a number of sectors, including financial services, healthcare, education, PE and asset management, real estate, strategy & business development, consumer/ retail, sales & marketing, engineering & operations, chemicals and agribusiness, among others.

Today, some 34 professionals help to manage its assignment flow. These include practice leaders, associate recruiters, a knowledge management team, operations staff, earning & development experts, and a revolving group of young interns at the ready to help with research, database building, and marketing & communications. It is a classic generalist recruiting boutique with a blue chip client base and lofty ambitions.

So it was that the new year started out as a seamless continuum of 2019, not only for Charles Aris but for nearly every other executive search firm. Emerging from the holiday season, business remained strong for recruiters across the country. Demand for talent was up and clients were hiring.

Expectations for 2020 were largely positive, according to a ‘Global Recruitment Insights and Data’ report by Bullhorn released at the start of the year. According to the firm’s survey, seven out of 10 search firms said they expected revenue increases in 2020; 19 percent anticipated revenue growth of more than 25 percent. At the same time, according to a Hunt Scanlon Media poll, 92 percent of recruiters said they had met or exceeded their revenue goals for 2019 and expected to do the same in 2020.

Continuity Planning

All of the metrics pointed to continued growth and expansion. Recruiters were focused on scaling for the future. To get there, a number of search outfits had recently hired chief growth officers to help manage all the prosperity. Private equity firms flush with investment capital circled the sector looking for consolidation plays.

Total revenues for the Top 50, which employed 3,151 recruiters across 535 Americas offices, surpassed $4.1 billion – an all-time high – in 2019. True, which grew 43 percent in 2017 and another 64 percent in 2018, increased its top line by 36 percent to $91.2 million. It achieved the highest organic growth rate among the Top 10.

Private Equity Funding

But it was growth through acquisition powered by private equity investment capital that resulted in substantial expansions at two leading boutiques: Diversified Search and ZRG.

Diversified Search, based in Philadelphia, recorded $103 million in revenues in 2019 providing it with an explosive growth rate of 71 percent. Backed by investment dollars from private equity firm ShoreView Industries, the firm acquired Koya Leadership Partners, one of the nation’s top search firms in non-profit and higher education.

With the combination of revenues and resources, the combined entity now represents one of the largest non-profit and higher education recruiting practices in the sector. Diversified Search also acquired Grant Cooper in 2019, a St. Louis-based healthcare-focused executive search firm. Established in 1957, Grant Cooper has been a pioneer in the recruiting field, and today is considered one of the more distinguished firms in the healthcare leadership space.

Judith M. von Seldeneck, founder and chair of Diversified, said the firm will continue to embark on a plan to add additional firms into the Diversified Search family of companies. “We are currently talking to several other boutique firms across the nation,” she said at the time of closing the Koya deal.

One such acquisition recently took place. Storbeck Search & Associates, a highly respected education-focused executive search firm founded in 2007, was acquired by Diversified in February. Its roster of clients includes top drawer universities, including Brown, Columbia, Haverford, Johns Hopkins, Lawrenceville, Michigan State, Northwestern, Pomona, Princeton, Swarthmore, and the University of Wisconsin, among a slew of others. Storbeck has 50 employees across seven states and the District of Columbia.

Not to be outdone, ZRG Partners saw its revenues jump by 73 percent, to $63.4 million. The firm now has 61 consultants and associates in 21 offices across the Americas. In the wake of the completion of its recapitalization with RFE Investment Partners, a lower middle-market private equity firm with a long history of investing in growth companies, ZRG made five acquisitions in 2019. Its largest deal closed at the tail end of 2019 when the firm acquired Toft Group, an executive search firm focused on the life science and biotech sectors, adding about $10 million in annual revenues to ZRG and bolstering its direct presence in the global life science sector.

Michael Rubel, managing director at RFE, said his firm is convinced that the human capital services market is ripe for disruption – and fresh thinking. “We are convinced that ZRG is approaching the market with the right blend of experience, leadership and disruptive technology which clearly is resonating with clients who want to acquire top talent globally,” he said.

Private equity funding is clearly a strategy that is working – and resolving a substantial capitalization need as search firms prepare for the long game ahead. Riviera Partners, ranked No. 18 this year, enjoyed a 20 percent growth rate in 2019. It closed a minority investment of $25 million last summer led by private equity firms Kayne Anderson Capital Advisors and ROCA Partners. “We target high growth companies that bring game changing software, processes and analytics to industries that are often behind the technology curve,” said Nishita Cummings, a Kayne Partners Fund partner. “In the same way that advanced analytics changed the game of baseball, we believe that Riviera’s proprietary technology and processes are changing the way executive recruiting is done. We are thrilled to become an integral part of helping them grow during this exciting time.”

In addition to its headquarters in San Francisco, Riviera is expanding in New York City, Los Angeles, Chicago, Seattle and Bozeman, MT. It regularly works with the tech industry’s most accomplished venture capital, private equity and growth equity firms as well as CEOs of growing companies.

Continuity Planning

Enter COVID-19. Within days of the pandemic surfacing first on the West Coast in late February, and then in Westchester County outside New York City during the first week of March, executive recruiters were called into client meetings nationwide to discuss contingency plans for search assignments in the pipeline. Some cancellations ensued, others were put on hold. Continuity planning suddenly went into overdrive at every executive search firm in the country.

According to the latest Hunt Scanlon Pulse Survey of leading search firms across the U.S. and overseas, confidence is now waning as 2020 unfolds. Some 49 percent of respondents said they were not optimistic as they looked at the landscape ahead. Just one-quarter said they were. A third hadn’t made up their mind. Three-fourths of survey respondents said they have seen a significant drop in business since the beginning of March, and 81 percent have seen active searches put on hold. Fully 64 percent now report they will miss revenue targets for the year. Charles Aris is unlikely to be an exception.

“Over the past eight weeks, we’ve had seven search cancellations and 38 searches placed on indefinite hold due specifically to the uncertainty caused by COVID-19,” said Charles Aris CEO Chad Oakley. “But we’ve also been pleased to successfully complete 31 searches and initiate 24 new searches during that same span.” Hopefully, he added, that portion of the trend line will continue.

To view this years ranking, click the image above or use the link here: https://huntscanlon.com/top-50/

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