If anyone has any advice or suggestions I would really appreciate your input. I have been recruiting for a long time and this has never happened to me before.
I worked a contingency search for new client last fall and was successful at placing a Project Manager candidate with them. I submitted 6 candidates the Managing Partner interviewed 3, they hired my candidate, paid me and all was good. One of the candidates that interviewed that they didn’t make an offer was considered too senior for the role but the Managing Partner liked her a lot. I happened to be looking on LinkedIn last week and noticed that this candidate changed her profile and is now a Principal at my client where she interviewed last fall.
I spoke to the Managing Partner about this and he doesn’t believe I am entitled to my fee because his firm acquired her firm. They bought her Consultancy (she was the only member), its assets, contracts, etc.,. His understanding of the agreement with my firm was for the pursuit of an individual to fill a key project management position and they compensated my firm pursuant to the agreement. He also maintained that they had on-going efforts in the acquisition/merger of viable firms before they retained my firm and continue to evaluate merger/acquisition opportunities in the markets. He believes that they have maintained the intent of the agreement and feels that it does not apply to the conditions of the acquisition of firms. I have a signed recruiting agreement that states candidates active 1 year from date of referral.
Has anyone dealt with this acquisition issue before?
Is this a fight worth taking on and if I do fight this do I retain a lawyer or a collection agency? Any suggestions on either would be appreciated.
Try this thought. Were they talking with her or aware of her business prior to the time they interviewed her through you? If not and the interview resulted in them making her an offer to buy her business i would take the position that without your introduction they would not have entered into negotiations with her. In that case what is their policy about paying a finders fee to anyone in the past who introduced them to a potential business for acquisition/merger, ie a business broker. Before i had that conversation i would find out if they have ever used a business broker or how they find potential acquisitions. If they paid a finders fee to a business broker you might have a shot at having that discussion with the managing partner.
Talk to the candidate. Ask her if they started talking with her about buying her business as a result of the interview you set up. I suspect that was the case, but find out for sure.
The decision to fight something when there is a disagreement about whether a fee is due or not depends on several things.
1. Do you ever want to place anyone with this firm again? If you do then have another conversation with the managing partner and discuss the fact that you filled the role of a business broker in this situation so if he does not feel that a placement fee is due perhaps he would recognize that without you bringing her to the table there would not have been an acquisition so perhaps a finders fee is due rather than a placement fee. If he says no way, i would try suggesting that this is an unusal situation you can see part of his point but you have a contract with them that makes it a somewhat cloudy issue because you referred her and no matter whether she was hired outright or bought along with her business, she is working there. Something that is very different so would he be willing to mediate with an independent thrid party whom he picks and you approve as truly being independent.
2. If you decide to pursue it, talk to an attorney, find out the cost of representation and the opinion of the attorney as to the strength of your claim. I think this one requires a legal opinion not just a collection agency due to the situation and your client's take on it. This could be a situation where one letter from an attorney will be all it takes. If not are you ready to spend time, money and the emotional investment, lose a client with no guarantee that you will prevail?
Normally if one company buys another the employees go along with the deal even if they have interviewed with acquiring company but as it appears the acquisition was a result of your introduction it would be interesting to get a legal opnion before you do anything more. How the law would intreprete your contract in this situation would seem to be the key. That would be my first step before any further conversation. If my attorney was confident i was due a fee i would attempt to discuss or mediate first.
@Matt - we have a clause in most of our agreements that cover acquistions, like Sandra mentioned, as a finders fee scenario. It was added after a situation similar to yours came up during a search. Luckily, the client asked us how we would like to handle it!
I won't go into much else, because I think Sandra covered everything. So before any additional steps at all, I would consider how much I value working with this client and go from there. Pretty much anything you do to further pursue this now will likely end that relationship.
I personally think they are abusing the acquisition speak given she was a solo practiioner and there were no additional employees besides her . I suspect the Mg Ptnr got creative in how he could avoid paying a second fee and designed this hire to appear to be an acquisition on paper. I would pursue the fee under your placement clause and cut them loose if it is clear after dust setttles this was a fee avoidance strategy.
Hi Matt. Very interesting post. Our fellow recruiter, business owner, blogger Sandra McCartt led me here. I have had similar things happen to me during my 12 years but not necessarily the exact same rational. Basically, the part that's similar is some technicality or claim by the client that relieves them of paying my fee. I don't want to talk about my situation since what's relevant is yours.
First, let me tell you that your issue is much more complicated than what appears on the surface to lay people. That's not to demean anybody's intelligence but this is not an issue of "intelligence" per se but rather the letter of the law. I'm also a 3rd year law student by the way. I'm embarking on my third career change. :)
Anyway, let me oversimplify what is actually quite an interesting and intriguing problem you have. You have one agreement and they are flaming some corporate merger trumps your fee agreement provision. It's a battle of contracts. One of the things to find out is if "she", the candidate" is a true bone fide "corporation" / business. If they acquired her business in a merger than there are actual steps that need to be taken. Any material misstep in the official legal process that is required for a true bone fide merger and its a fraud. It's no merger at all. Get me? Another approach is to actually charge them with something serious like fraud and intentionally screwing you over. This is juicy punitive stuff which means you may not only get the value of your services or the contract price that they would owe you under normal circumstances but that because their actions were done with mal intent you would get the value of what dollar figure would punish them. If they are a $1m a year firm, about $200k would be right and so forth (however this is hard to prove). You have to prove they intentionally knowingly went against your agreement so they could avoid paying fees instead of their likely claim of a legitimate business interest in her firm's services.
1. Just taking at face value what you stated, you have a good case.
2. To determine how good, will require more information. Probably not worth fighting unless you have at least 65-70% chance of winning.
3. Even if you do win, it will cost you money.
So answer yourself this question. Do you think that a properly addressed and serious demand letter and a little bullying will get them to see the error in their ways and settle out of court? Do you know what kind of people they are and how deep their pockets are? If they are the type to fight it out, you're probably better off just letting it go and chalking it up to a lesson learned.
Feel free to email or contact me. Your situation is of interest to me but I am not an attorney.
Thank you all for your input it helped in my resolution to this situation. I didn’t want to burn my bridge with this client or engage an attorney with all the emotional and monetary expense. I spoke again with the Managing Partner and I offered to meet in the middle and cut my fee in half. He thought that was fair and I will still maintain my good relationship with the firm. He emphasized that he didn’t want me to think he was trying to steal my candidate and I believe him. I do feel good about this and I think I could have fought to get my entire fee but I believe maintaining good will with this client will benefit me in the long run.