No one can accuse John Wallace of timidity.
The new CEO of search firm Caldwell Partners International Inc. pulled the trigger on a bold U.S. expansion plan to resuscitate the moribund company in February, 2009, just months after the financial crisis had blown up Wall Street, and just as the United States was sliding into what would become a lingering recession.
The plan has worked despite the odds, and Mr. Wallace is now surveying a business that would have been unrecognizable three years ago. The Toronto-based firm has nine office locations throughout Canada and the United States, has seen its revenue grow 112 per cent since 2009, and is aiming to triple its size over the next decade.
But the new-found momentum was far from certain when Mr. Wallace first approached company founder Doug Caldwell in 2007 with a proposal to come on board with a bold new growth plan.
At the time, Caldwell Partners had been struggling against a wave of global search competitors expanding in Canada and had seen its revenue slide from over $30-million in 1998 to a low of just $12-million by 2004.
“I felt the firm had seen its better days,” Mr. Wallace says. “The fact is Doug was an absolute lion, a pioneer in the business, the first one to start executive search as it is defined in Canada. But a lot of competitors came in and a lot of things changed. And I think the strategy they were taking was one that was going to take them down a bad road.”
For decades, Caldwell Partners had been a leading force in Canada for searches at the top end of the market for senior executives. In 1989, it became the first executive search firm in North America to go public, listing its shares on the Toronto Stock Exchange.
But as many of the world’s major search firms became more aggressive in Canada in the late 1990s – firms like Spencer Stuart and Egon Zehnder – Toronto became a highly competitive market. Caldwell’s profile and revenue waned, and by 2006, minority non-voting shareholders had launched a court case alleging that the company had disregarded their interests by paying excessive executive compensation and engaging in related-party deals.
The ugly battle shook the genteel firm, which resolved the case in part by agreeing to convert their non-voting shares into voting shares. That’s when Mr. Wallace approached the board.
He was a Canadian executive search professional who previously headed U.S.-based Highland Partners, which was sold in 2006. After debating what to do next, Mr. Wallace decided to get back into the game with a proposal to expand Caldwell Partners. Mr. Caldwell ceded the title of CEO not long after Mr. Wallace joined in 2008, and fully retired in 2010. He now has no board or management role, but remains a shareholder in the firm.
Another long-time Toronto search professional, Elan Pratzer, joined the firm earlier this year as managing partner for Canada after his firm, Pratzer & Partners, was sold to Korn/Ferry International. He says Mr. Wallace had a vision that he also shared, believing it was possible to build a Canadian-based search firm with a scope to serve Canadian companies in their U.S. operations as well as U.S. companies in their home country.
“I know it’s not everyone’s dream, but it was ours,” Mr. Pratzer says. “The dream was to build the great Canadian advisory firm in executive search. And why couldn’t it be done?”
Opening the first offices in San Francisco and Los Angeles in February, 2009, was not ideal timing with companies across North America cutting costs and slowing their pace of hiring. But the firm found work and expanded to six U.S. locations on top of its existing three Canadian offices.
“When you hire good search consultants, they have a knack for finding niches where the business exists,” Mr. Pratzer says.
In fiscal 2011, ended Aug. 31, Caldwell Partners reported that revenue had topped $34-million, a 112-per-cent growth rate in two years. More significantly, 63 per cent of that came from the new U.S. operations, which have quickly eclipsed the Canadian business. Mr. Wallace wants to continue the U.S. expansion while maintaining a base in Canada, and hopes to see the firm reach $100-million in revenue within the next decade.
The firm is also moving up-market to do searches for more senior executives, which Mr. Wallace argues is critical in an era where LinkedIn can help companies find executives themselves, and major U.S. firms are building their own in-house search teams for middle-management positions.
While Caldwell remains a comparatively tiny player next to the five large global firms it faces, Mr. Pratzer says there are advantages to the middle tier where there are fewer complications from deals with major clients to make their staff off-limits in future searches for other clients.
“We’re one of the few service industries where being medium sized actually works,” he says. “You can provide the home to the top-notch recruiting talent ... and you also don’t have the off-limits issues.”
Editor's note: The buyer of Pratzer & Partners has been corrected in the online version of this story.