Korn Ferry to acquire Hay Group
Under the terms of the acquisition agreement, Korn Ferry has agreed to acquire Hay Group for an aggregate purchase price of approximately $452m, consisting of (i) approximately$252m in cash, net of estimated acquired cash and after giving effect to estimated purchase price adjustments as described in the Purchase Agreement, and $200m in the Company’s common stock.
The completion of the transaction, which is subject to Hay Group shareholder approval, receipt of antitrust clearance and other customary conditions, is expected to close before the end of calendar year 2015. The transaction is expected to be accretive to earnings per share in the first full year after adjusting for purchase accounting deferred revenue write-offs, intangible asset amortization, retention bonuses and restructuring and transaction costs.
Immediately following the closing of the transaction, Korn Ferry will combine Hay Group with Korn Ferry’s Leadership and Talent Consulting (LTC) segment and brand the combined advisory business as Hay Group. Stephen Kaye, CEO of Hay Group, will continue to serve in this capacity with Korn Ferry.
In connection with the transaction, Korn Ferry has entered into an amendment to its credit agreement with Wells Fargo Bank, National Association which, among other things, provides access to a new $150 million delayed draw term loan facility and reduces the borrowing capacity under Korn Ferry’s existing revolver from $150 million to $100 million. The amended facility will have a five-year maturity. Korn Ferry plans to partially draw down on this facility to finance a portion of the cash consideration.
On a current annual run-rate basis, Hay Group is generating approximately $500 million of revenue and EBITDA, adjusted for historical expenses that will not continue in the combined segment, of almost $40 million. Korn Ferry is targeting annual cost synergies of at least $20 million within the first year of the closing of the transaction with longer-term EBITDA margins of the combined segment of approximately 14% to 18% (operating margins of 9% to 13%). The targeted cost synergies relate primarily to operating efficiencies expected to be realized by leveraging technology platforms and reducing general, administrative and real estate costs.
Gary D. Burnison, CEO of Korn Ferry, said, “Without people, there is no show. Rockets didn’t take us to the moon it was the engineers and the dreamers. The Internet didn’t create a globally networked economy it was the innovators and creators. Since the beginning of time, people have been the ultimate differentiator. Yet today, this simple truth is all too often plastered on office walls, but rarely acted upon in the halls. We need a new conversation on people.
“That’s why Korn Ferry is combining with the Hay Group – knowing that when people align to a strategy and are developed and empowered to succeed, anything is possible. Korn Ferry, now with Hay Group, will be the preeminent global people and organizational advisory firm. We will be approximately 7,000 of the best and brightest minds of our industry who have a single goal. Unleashing the best and brightest people so that organizations around the world may reach their highest aspirations, strategic goals, and ultimate potential.”
“We are delighted to be joining Korn Ferry,” said Stephen Kaye, CEO of Hay Group. “We feel this is the perfect combination of two great firms that will be uniquely positioned to help clients achieve their strategic goals and highest aspirations. In Korn Ferry we have found a like-minded partner committed to enabling stellar business performance through people and organizational effectiveness. We are now witnessing an extraordinary transformation that will shape the future of work and the global business environment – united, we offer an incomparable capacity to help clients succeed in this new context.”
Korn Ferry received legal advice from Morrison & Foerster LLP and Gibson, Dunn & Crutcher LLP, and financial advice from BofA Merrill Lynch Hay Group received legal advice fromSullivan & Cromwell LLP and financial advice from Goldman, Sachs & Co.