Episode Transcript
[00:00:00] Okay guys, I want to give you some insights into this big merger that just was announced today. The acquisition of AMS by Korn Ferry. Korn Ferry is a publicly traded company with about $3 billion of revenue that delivers executive search, talent management, talent development, succession management assessment and all sorts of learning solutions to lots of large corporations. They're a consulting firm with lots of technology products, not one product, but a who bunch of them. They are a roll up of many advisory, consulting and assessment firms over the years. They have a partner centric model where they sell to large corporations through senior partners, senior partners who oftentimes do executive search for companies. So they have lots of senior executive relationships. And the company went public and has been growing at a reasonable rate, not, not super fast and is looking for opportunities to grow. AMS is sort of a mirror image only focused on talent acquisition with the added capability that AMS is a very sophisticated process outsourcing or RPO firm. AMS also has very large strategic relationships with large companies and they focus on the complexity of all different types of talent acquisition. High volume, high skilled roles, high, high turnover companies, large global companies, they work with a lot of large banks and financial services companies. They also help airlines and other industries. And they built a global set of service centers to handle these large complex talent acquisition organizations. That is a big plus for Korn Ferry because Korn Ferry doesn't have that kind of operation. Korn Ferry is more like a traditional consulting firm as I understand it. And the AMS business has a backlog of a billion and a half of committed clients, which makes Korn Ferry almost twice as big from a revenue standpoint, a revenue potential standpoint. And the margins that come from the RPO business are sort of complementary to the margins that they get from the talent management business. So together these companies will be around four and a half billion or so of run rate revenue, 500 to $600 million of EBITDA or profit, and a 12 or 13% margin, which isn't bad for a consulting firm and it's not a bad for any company to be honest. And because the AMS business is so different and integrated and really somewhat related to what Korn Ferry does, there's a lot of potential for growth as the two companies start to work together. I've met many, many people at Korn Ferry over the years, all different types and background, very heterogeneous in their offerings, but the one thing they have is a very focus on client engagement, client services, client consulting and senior executive relationships. So now when Korn Ferry or AMS goes to and IIMs, by the way, mostly sold to heads of recruiting, so they didn't have the senior level relationships. So going forward, when a Korn Ferry partner who might be working with a CEO to maybe do an executive search of a certain role and also is helping the CEO with a succession process or a talent development process or an organizational transformation, can say to the CEO, by the way, we can also take care of this recruiting function you have and make it either more efficient or more aligned or redeploy in a different direction to go new ways, despite the fact that AI is threatening to automate all of this. Now, you might think to yourself that these talent consulting businesses like Korn Ferry are threatened by AI. And you know, theoretically they are. But in reality, as agentic HR solutions enter the market and we're all over this with our HR 2030 program, what we're actually finding is there's a lot of services required, not only services to design and select and implement the AI, which these guys could get into. I don't know if that's really their forte at the moment, but really to decide how to operate the company in this new agentic world. And what are. What I know ams did, and I assume this is going to happen at Korn Ferry, is they became very savvy about where AI does and doesn't add value and they selected certain vendors to do a lot of work with that they felt had a lot of potential in the market. So Korn Ferry can take advantage of that expertise in ams to get even smarter about their emerging opportunities in different parts of human capital relative to AI. If you listen to the conference call and you sort of look at the numbers, there's also just a basic growth issue here that I sort of feel like Korn Ferry's number one strategy has been to attract more clients and more revenue through acquiring more companies. You know, in some cases that doesn't work because the company becomes kind of a basket of parts. But in this case, because Korn Ferry has such senior executive relationships, they can bring in these different service lines or service offerings to a company fairly easily through their executive sales. In some ways, this is the way the world worked. At Deloitte, if the senior partner had strong relationships with the CEO, cfo, cio, chro, then what we could do at Deloitte is Deloitte could bring in services and expertise in different areas very easily, as opposed to selling to a operational or director or lower level VP in one domain and trying to expand across it's much preferable way to go to market. The other reason I think this is a good deal for Korn Ferry is the AMS management team is a very strong management team. Now, it may be that some of them leave because this is a big payoff and the private equity firm and founders may decide this is a good opportunity to exit, but they've really run this business extremely well. RPO is very dynamic, very technology dependent, very episodic, based on the economy and very industry specific. And what I've learned about AMS and our relationship with AMS over the years is they're comfortable with all of those changes and they've been through this for a long time. So the industries that they focus in and the technologies that they work in are not random. They've been actually quite deterministic about where they focus. And that's the reason that they were growing and so big and profitable as a consulting firm. For those of you that are customers of AMS or Korn Ferry, I mean, who knows what could happen? But I think this is a positive overall. I think those of you that are in talent acquisition, that are working with AMS today should be able to get some great support and advice and additional services from them now that they're part of Korn Ferry. Those of you that are Korn Ferry customers in leadership or executive recruiting or succession or assessment or other areas now can broaden the scope of your engagements with the company. Because there's a group of experts in recruiting and talent acquisition and global talent acquisition. And as the companies, as the two groups spend more time together over the next several quarters, maybe into next year, I think there's some really amazing things they could also offer in the future. Internal talent mobility, internal talent development strategies, M and A strategies, redeployment of strategies that'll be even more powerful as a value add solution. I have noticed, by the way, that the human capital consulting businesses at Accenture, Deloitte and PWC have not kept up with some of the trends in AI. They're trying, but I don't think they've kept up as well as I would have thought. And I think that's just because there are specialists like Korn Ferry and us and others that have been deepening in this space. And so the idea that a human capital consulting business could be a sideline of a larger IT consulting firm may be less and less true because a lot of the human capital consulting in those companies was mostly change management and implementation of Workday or SAP. So that's still there. But the more sophisticated issues of development, succession, recruiting, internal mobility, executive sourcing, so forth are not easy for a generic consulting firm to do. So maybe this move will have a bigger impact over time, where it'll create a deeper respect for deep specialization in human capital as opposed to sideline activities of other consulting firms. Just thinking out loud. Anyway, we're pretty close to both companies, and we'll spend more time talking to Korn Ferry about the plans as it moves along, and I hope I can keep you guys up to speed. And of course, a lot of the work we're doing in HR 2030 is all about this. So for those of you that are a little bit confused about what all these services are and how they relate to AI, just give us a call and we'll show you exactly how this all works. That's it for now. Talk to you guys later.
