Niche financial services recruiters queueing up to cash in

There is excitement among the owners of niche financial services recruitment firms in the City. In the past few years, several of their number have been swallowed up larger entities. According to the head of one investment banking-focused recruiter it's still happening, below the radar.

"There's a buy and build ethos developing," he says. "Good consultants are hard to find and the best way for a big recruitment firm to expand is to buy specialist boutiques in areas like asset management. I know of at least three purchases that are in process of going through at the moment."

In the past few years, GRS, Randstad, Heidrick & Struggles, and Korn/Ferry International have all swallowed smaller entities in the financial services space.

Randstad, at least, now appears to be digesting its recent acquisitions rather than searching for more of them. "Right now we are focused on organic growth through the optimisation of our own extensive resources," says Brian Wilkinson, a member of the Randstad executive board, with responsibility for the UK.

The head of the recruitment firm says the asking price for niche financial services recruiters is usually in the range of 10m and that prices are rising to equate to three or four years' revenues: "You get some initial cash and the chance to earn equity in a larger firm which you can sell after an earn out."

However, the head of one acquisitive recruitment company warns that selling up is not as easy as it looks: "Be careful what you wish for. The going price is one years' revenue, with 50% paid up front and 50% after three years if things go well. If things don't go well, you could find yourself out on your ear having sold your business for half price."