Post by Simon Childs

Why is it so hard to buy a retained search firm?   I recently helped ZRG Partners, LLC—backed by PE—transition nearly an entire team from a retained search firm in Singapore to launch their search offering across Asia (ex-ANZ). More acqui-hire than M&A, it took months to engineer and close.   Executive search firms seem like great M&A targets—high margins, strong brands, trusted client relationships. But dig deeper, and challenges emerge:   1.Founder dependency – Many firms revolve around one or two strong personal brands. Without them, clients often don’t stay. 2.Lumpy revenue – Unlike temp or RPO models, search work can be unpredictable. A few big months... then none. 3. Scaling issues – Growth requires senior talent. Juniors take years to develop, and many leave as their promotion paths are blocked by long-stay partners. 4. Valuation gaps – Sellers see prestige and margin. Buyers see risk—few billers, few clients. Result: long earn-outs (if deals happen at all). 5. Client sensitivity – Retained search is discreet. Some clients are hesitant to welcome a change in ownership or process.   Here what I’ve learned about how buyers can de-risk:   1. Structure for retention – Use earn-outs tied to revenue/gross profit. Lock in key people with strong packages. 2. Keep the brand (for now) – Trust is everything for retained clients. In my firm, CDS, the buyer (Recruit Holdings Co., Ltd.) held off on rebranding to RGF Executive Search Japan for 10 years. 3. Engage top clients early – Test if client loyalty lies with the firm or the founder. 4. Build scalable delivery – Support senior consultants with smart sourcing, AI automation, and offshore teams. 5. Align incentives – Use equity, phantom shares, or long-term incentive plans (LTIPs) to retain talent. 6. Culture check – Boutique firms can struggle post-acquisition—fit matters. 7. Try before you buy – A JV or minority investment can test compatibility before diving in.   It’s not easy—many retained search M&A deals fail. But with the right structure and mindset, it can be a smart, strategic move in a sector that’s surprisingly resilient to the sweeping changes AI is bringing.   #ExecutiveSearch #MergersAndAcquisitions #RetainedSearch #RecruitmentM&A #StaffingStrategy #DealMaking

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