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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
- 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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