The $452 million purchase of Hay Group is not only the largest acquisition Korn/Ferry International has made to date, it’s one that took eight years to finalize.
The Century City executive search firm completed its deal with Hay, a similar firm based in Philadelphia, early last week.
“This is something I’ve had my eye on for a long, long time,” said Korn Ferry Chief Executive Gary D. Burnison. “My first overture with them was eight years ago and then in the spring this year I reached out again and things really got intense by summertime.”
If preliminary reactions are any indication, it appears the deal was worth the wait.
Analysts praised the acquisition as it advanced Korn Ferry’s goal to push into new segments of the industry. The company’s investors also welcomed the news as the deal drove shares up nearly 6 percent last week to close at $38.18 on Dec. 2, one day after the announcement.
Even more good news for Korn Ferry investors could come Dec. 9, when the firm is slated to announce its results from the last fiscal quarter, ended Oct. 31.
Analysts predict the firm will boast a net income of $25.6 million (53 cents a share) on $274 million in revenue. If the consensus estimates hold true, the company would surpass the net income of $25.4 million (52 cents a share) it reported for the same quarter last year.
Tobey Sommer, an analyst at SunTrust Robinson Humphrey in Atlanta who tracks Korn Ferry, said he anticipates the deal will increase the firm’s annual earnings before interest, taxes, depreciation and amortization by $91 million within two years. That would add quite a bit of padding to the company, which reported its Ebitda at $152 million during the last fiscal year, ended April 30.
“This acquisition is transformative, in our eyes, creating a senior talent advisory company built upon core executive search but capable of offering services ranging from succession planning to executive coaching and from compensation database services to recruitment process outsourcing and talent evaluation,” Sommer wrote in a Nov. 23 report.
Korn Ferry has about 4,000 employees and Hay 3,000, Burnison said.
When Lester B. Korn and Richard Ferry co-founded their firm in 1969, they specialized only in helping businesses find top talent to serve in executive positions. And in the following decades, executive searches continued to be Korn Ferry’s bread and butter. The company became the largest executive search firm in the world by the 1980s – a title it still holds today.
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