DHR/CT Partners Merger: Who cares?

Generally speaking, when owners of a business form a committee to consider their “strategic options,” everyone needs to take cover or head for the exits because it’s a clear sign no one knows what they’re doing.

Except, of course, if you represent middle market firms active in executive search, or Search as the industry’s long-time players like to refer to themselves. Recent news http://nypost.com/2015/02/23/embattled-ctpartners-faces-potential-takeover-by-rival/ that CT Partners has formed a committee of its own board members to consider options, including a hostile bid from DHR International, is the latest update in a saga that pits two small firms trying to compete against larger players. See an earlier posting here: http://povblogger.blogspot.com/2015/02/dhrs-hostile-bid-for-ct-partners-search.html.

To paraphrase one of Search’s all-time seminal figures, deals are about personalities just as much (if not more so) than numbers. In CT Partners’ case, the personality is CEO and primary owner Brian Sullivan who has been targeted in a sexual harassment case pitting female partners against what they’re claiming is rogue behavior and unfair treatment in the workplace — on Wall Street. Smart, blunt and controversial, Sullivan suffers no fools. DHR International’s main personality is actually a Father/Son tag team: Father, or Chairman David and son, CEO Geoff Hoffmann. In previous cycles, Dad was spinning about how complementary the two firms would be in Europe and Chicago where combining the offices would save money. Really? So much so that industry reports now buy into the rationale. Dad even went as far to say to the NY Post that “the lawyers are negotiating non-disclosure agreements” referring to the potential deal.

Brian Sullivan
David Hoffmann

Even if this merger of so called equals were to take place, it doesn’t add up to much other than vested interest. And clearly not enough to change the industry. A combined entity wouldn’t even equal six months of revenues at Korn/Ferry International (NYSE: KFY), which is now the “industry leader” should that status still even matter. Long-time rumors about Korn Ferry combining with another large firm have remained just that largely because the economics and cultural issues that would arise from merging with another firm don’t make sense. Plus the obvious: Going alone seems to be working just fine.

The only merger that would make any difference is if Heidrick & Struggles (NASDAQ: HSII) were to combine with privately held Spencer Stuart. Heidrick’s year-over-year earnings, reported earlier this week, remained relatively flat while Spencer Stuart is firmly entrenched in the Fortune 100 CEO and executive suite, where Search has traditionally made its name. There are a few exceptions, but for the most part, lay of the land remains the same despite continued need for consolidation. Ironically, the industry that hyped the “War for Talent,” now finds itself in one as veteran partners are staying put instead of taking the risk of losing brand name position established by their firms.

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