[Joncarlo Bairos]

Most commercial DD examples in the course were product businesses: trim parts, labels, copper, locking systems. I’d like to hear how people approach a professional-services target (recruitment, consulting, accounting, IT services), where much of the value sits with a few people and the clients they look after.

The course tools all point at the same risk. An ABC analysis often shows a few large accounts, and switching costs are low because clients tend to follow the partner or recruiter they trust rather than the brand. The HR DD session made the point that in people-heavy businesses the people are the asset, and Mercer’s data showed retention bonuses are much more common in professional services than in asset-heavy sectors. On the legal side, change-of-control clauses in client contracts and non-competes in key employees’ contracts decide how much of each relationship actually transfers.

What I’m less sure about is pricing it. Do you lower the multiple, move part of the price into an earn-out tied to client retention, make waivers from top clients a closing condition (and accept the confidentiality problem that creates), or lean on retention packages for the people who hold the relationships? It will usually be a mix, but which lever does the most work?

At Forge we work across recruitment and M&A, and in recruitment we see how often relationships move with the person. For those who have bought or advised on services businesses: how did you test which client relationships belong to the firm and which belong to the individual, and what did you do with the answer?

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