AFIMAC
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Healthcare
Current
Klein Hersh is the country’s leading executive search firm focused exclusively on the life sciences and healthcare industry. Founded in 1998 and based in Horsham, PA, the Company delivers high-level, senior hires for some of the world’s foremost pharmaceutical, biotech and healthcare companies. Klein Hersh uses its relationships and deep subject matter expertise to match its clients with C-Suite executives. The Company employs a consultative, proactive approach to help its customers grow faster.
Case Study Details
Background
- New State partnered with Klein Hersh’s management team, who were looking to recapitalize the stakes of two founders who were exiting the business
- Following a broken process, we maintained close contact for over a year with the sellers who ultimately worked directly with New State on a negotiated basis outside of a formal sale process
- We closed the investment in November 2020 and completed the ESOP conversion in April 2022
Why an ESOP?
- An ESOP was the right solution for Klein Hersh because as an executive search firm, its people are its most important assets
- While the company benefits from a 95%+ retention rate, the ESOP structure allows broader ownership and continued employee alignment in a competitive labor market
- Strong free cash flow dynamics in this asset-light business are further enhanced by the tax-free ESOP structure
Key Transaction Considerations
- Rollover equity prior to the ESOP conversion was owned largely by senior management; post-conversion, management ownership is capped due to regulatory requirements and to ensure broad distribution across the employee base
- Senior management was supportive of the structure; they view the broader team as critical to Klein Hersh’s long term success and feel the alignment only strengthens the long-term value of the business
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