What am I buying when I buy an executive search firm?

A retained search firm is paid to run a search for a client, usually in instalments, and it does the work through partners, researchers and a body of candidate knowledge. A buyer gets very little that is physical. What you acquire is a set of relationships, work in progress and promises, and each of them can be strong or weak. Treat the list below as a checklist of facts to confirm.

Client relationships and who holds them

Ask which partner brought in and manages each client. A relationship that sits with one person may leave with that person. Read the client agreements to see who the contracting party is and whether the client can end the arrangement or must consent to the sale. Ask how many clients have used the firm more than once, since repeat work is easier to carry over to a new owner.

Searches in progress and retainer billing

Ask for a list of open searches, how far along each is, and which instalments have been billed and paid. Work that is half done at closing raises a plain question: who finishes it, and who keeps the money still to come? Your lawyer can reflect the answer in the purchase agreement. Check that billing for open work is recorded the same way in the books as in the contracts.

Off-limits promises and guarantees

Search firms often promise clients not to approach their employees for a period, and many offer a replacement search if a placed executive leaves early. Both are commitments you would inherit. Ask for each client’s terms in writing, and ask how often guarantees have been called on.

The database and the team

The candidate and research database is worth only what its records and permissions are. Ask how it is stored, who can access it and how candidate consent was handled. Then meet the researchers and associates, since they hold the working knowledge. For the broader checklist, see what a buy-side advisor does.