How Search Firms are Winning Through M&A and Unlocking Value

August 16, 2024 – Talk to just about any executive search firm founder today and the conversation does not take long to come around to the topic of mergers and acquisitions. Over the last five years, M&A activity across the executive recruiting sector has reached fever pitch. “Consolidation among competitors has been reshaping the industry unlike any previous time,” said Drew Seaman, a managing partner at Hunt Scanlon Ventures. Mr. Seaman joined Hunt Scanlon from BMO Capital Markets 13 months to help manage the firm’s growing deal pipeline and build out its technical proficiency in valuation & financial modeling and data room management.

According to Mr. Seaman, there is a big shift underway that is leading to an extraordinary readjustment within the sector. The result for founders is a real pathway to both expansion and exit.

“With favorable market conditions improving, many search firm founders and their management teams have been seeking new ways to expand and remain competitive,” said Mr. Seaman. “Others, of course, see this as a heaven-sent time to seek out transitions and exits after spending years at the helm. In just about every case, it often means walking down the path of M&A.”

Capitalizing on Change

Developing a well-thought-out M&A strategy, said Mr. Seaman, is not without its challenges. “The M&A journey is a strategic process that is intricate and highly emotional – after all, these founders are facing the most critical career and financial decisions of their lives,” he said. “But when it culminates in a successfully closed transaction, the stress of getting a deal over the line fades into the background.”

According to Hunt Scanlon Ventures co-founder, Scott A. Scanlon, what is driving M&A deal activity and rising interest in the sector has been a shift in the tactical value that recruiters now bring to the table. “Search firms are playing an increasingly more complex role as strategic people partners to an ever-expanding client base,” he said, “and smart founders are coming to us to sort out how to capitalize on this once-in-a-lifetime change.”

Using a unique blend of proprietary market intelligence based on over 35 years in the field, Hunt Scanlon’s M&A advisory business has become a valuable resource for founders willing to take this journey. “We have closed some of the most prominent deals in the space,” said Mr. Seaman. “Based on our current deal pipeline we see a big acceleration ahead for M&A in this sector as the economy turns up, dry powder is put to use, and search firm leaders one again focus on nothing but growth.”

Delivering Shareholder Returns

To unpack current trends in M&A across the human capital sector – and to take a deep dive on what it all means for founders and their management teams – Hunt Scanlon is gathering over 200 leaders next month to explore how search firms are winning through M&A and unlocking value.

Related: Creating a Winning M&A Leadership Team

Jeff Rudnicki, a senior partner and global leader for M&A strategy at McKinsey & Company, will unveil new research that confirms the high value that programmatic M&A brings to companies that pursue it. “Regular and systematic M&A not only delivers better shareholder returns, but it often drives value creation,” he noted. In his presentation, ‘Winning Through M&A: The Remarkable Habits of Successful Dealmakers,’ Mr. Rudnicki will identify four crucial strategic actions that programmatic acquirers take and the relationship that those actions have to outperformance.

Prolific Deal Making

Todd Safferstone, global co-leader of strategy and excellence at Russell Reynolds Associates, will team up with Todd Savage, managing director for the firm’s global technology sector, to discuss the intricacies of their recent merger in ‘Why We Sold; Why We Acquired.’ Through thoughtful and considered acquisitions, Russell Reynolds Associates has been deliberately reinforcing and deepening its capabilities, differentiating the firm’s talent and expertise while strengthening the leadership insights it brings to clients worldwide.

Last year, in fact, marked an M&A inflection point for the organization: it acquired three firms across coaching, team development, and executive search. Its acquisition of Savage Partners was particularly noteworthy, as it deepened and enhanced Russell Reynolds Associates’ core leadership advisory work and capabilities in growth-oriented technology companies.

M&A Playbook

No firm has been more prolific in making acquisitions than ZRG Partners. According to Justin Pinchback, the firm’s chief revenue officer, more and more growth investors now view human capital management – which includes executive search, interim solutions, leadership assessment, culture transformation, and talent coaching, among others – as an investment sector of choice. In ‘Opening Up the M&A Playbook at ZRG,’ Mr. Pinchback will take the audience inside the M&A playbook of one the fastest-growing search firms in the U.S. – and reveal how it might be modified in an improving deal climate.

Managing Risk

Of course, managing investment risk is high on the agenda of M&A dealmakers in 2024. And for good reason. For every successful transaction, there are countless others that flame out. This has led to increased scrutiny by decision-making and risk management teams who are doubling down on critical pre-acquisition due diligence prior to investing.

Often times, that means focusing on the talent that comes along with the deal. Getting human due diligence right, in fact, is surfacing more than ever as the essential component of every well-run M&A process. Michael Karran, a managing director of Mintz Group, a corporate investigations and risk advisory firm, will examine why risk mitigation and talent screening is now rising to the top of every dealmaker’s checklist.

Tickets to Hunt Scanlon’s ‘Executive Recruiting M&A Founders Forum’ on September 19 are available on a limited basis. To secure your pass, please click here.

Related: M&A Deal Volumes Jump As CEOs Hunt Down Acquisitions

Contributed by Scott A. Scanlon, Editor-in-Chief and Dale M. Zupsansky, Executive Editor  – Hunt Scanlon Media