First Read: Korn Ferry "Significantly Expands Workforce Solutions with..."

Research evidence excerpt

First Read: Korn Ferry "Significantly Expands Workforce Solutions with..."

X EBITDA on a standalone basis and 8X EBITDA on a

Q2E 1.46 1.45

synergized basis in year one. The deal is expected to close in FQ2-27 (Oct quarter). Q3E 1.41 1.43

Strategic - significantly expands workforce solutions. AMS has an estimated Q4E 1.50 1.53

04/27E 5.74 5.78

nearly $400m business in Recruitment Process Outsourcing (RPO), comprising

04/28E 6.36 6.39

~60% of AMS revenue, which will roughly double KFY's RPO business. Besides

04/29E 6.87 6.87

RPO, AMS also adds adjacent workforce capabilities in contingent workforce, early

careers, and technology consulting, most of which with some overlap to existing Joshua Chan, CFA

KFY offerings. Due to the business profile of AMS, this is an inherently longer-cycle Analyst

business than KFY's blended average. Although AMS will add ~22% to joshua.chan@ubs.com

KFY revenue, it will add ~80% to KFY's backlog and extend its average duration. +1-212-713 9957

Management also highlighted meaningful client overlap, potentially creating Karandeep Singhania

cross-sell opportunities and deeper enterprise relationships. We think the Associate Analyst

acquisition is consistent with KFY's expressed strategy to create a more stable and karandeep.singhania@ubs.com

longer-cycle business (than Search), though we suspect the doubling down on +1-212-713 4211

RPO may surprise investors and it also remains an open debate among investors Brianna Kamdoum

whether this diversification is the highest-return method of capital deployment for Associate Analyst

KFY. That said, we note that the financial aspect of the deal (especially if KFY can brianna.kamdoum@ubs.com

scale the acquired EBITDA) can work, per below. +1-212-882 5027

Financial implications.