Hay Group to be sold for $452M
Hay Group, a Philadelphia human resources consulting firm best known for its compensation surveys, will be sold to Korn/Ferry International, one of the world's largest executive-search firms.
Hay Group, a Philadelphia human resources consulting firm best known for its compensation surveys, will be sold to Korn/Ferry International, one of the world's largest executive-search firms.
For Korn/Ferry, the $452 million stock and cash deal announced Thursday will broaden its reach beyond recruiting into the field of human capital management, organization building, and leadership training.
For Hay Group, the combination "will allow us to get to scale quicker," said Hay's chief executive, Stephen Kaye, providing broader access to the executive suite and an expanded market for Hay's services.
"This is a combination of two companies with a real shared vision," Kaye said. "There's a real strategic fit for the organizations.
When the deal closes by year's end, Korn/Ferry's Leadership and Talent Consulting segment, which brings in $280 million and represents about 30 percent of its business, will be folded into Hay Group, which has annual revenue of $500 million. Kaye will lead the combined company.
What the deal will mean for Philadelphia is less clear. Hay's 3,100 employees work in 88 offices in 50 countries, with about 200 in Hay's corporate offices in Center City.
They learned about the deal at an office meeting at 9:30 a.m. and then, over pizza and salad, joined their colleagues in U.S. offices for a lunchtime webinar to learn more.
In announcing the deal, Korn/Ferry, which has 3,900 employees in 78 offices in 37 countries, said it expected to achieve $20 million in "cost synergies" by combining offices and reducing general and administrative costs. Korn/Ferry has an office in Center City.
On Thursday, Korn/Ferry's stock traded at more than five times the normal volume and closed at $35.26 a share, up $1.11.
Kaye said there was no immediate vision of how the deal would affect positions here, although across the organization, it should lead to more opportunities for Hay employees.
"Headquarters are increasingly virtual," he said, adding that he planned to continue living and working in Philadelphia.
"Companies are willing to spend big bucks for access to these kinds of things, assessment and leadership development, the whole human capital consulting business, organizational development," said Judith von Seldeneck, chairwoman of Diversified Search, an 150-employee executive-search company based in Philadelphia.
She said she was surprised that Hay could command a price of $452 million but said its compensation surveys had been well-respected for decades.
Hay got its start here in 1943 when the former First Pennsylvania Bank's top personnel officer, Edward Hay, struck out on his own and landed a contract with General Mills analyzing executive positions.
Privately held, Hay Group is owned by 150 partners, including Kaye, who are all employees of the company, which is incorporated in Bermuda under the name HG Limited.
"Korn/Ferry has been making moves to broaden its offerings," said Mark Marcon, an analyst with Robert W. Baird & Co. Inc., a Milwaukee equity research firm. The Los Angeles-based company bought the executive-education company Pivot Leadership in March.
He said Hay was "the crown jewel" for Korn/Ferry and its largest acquisition, with the company drawing down on a new $150 million loan to pay the $252 million cash component of the deal.
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