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HeadHunter Ukraine gets new name and owners. AIN.UA has learned details and price of the deal

It seems that the company was sold for a “dollar”.

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The job search site HeadHunter.ua announced a name change back on May 31. After rebranding, which is promised to go “smooth and gradual,” the company will be called GRC. The news of the change of identity of one of the largest job search sites in the country went unnoticed even in the mainstream media. AIN.UA reached out to the company for comments about the reasons for changing the name and was told that the company went beyond the limits of the job search site and became a resource for all players in the labor market. The new abbreviation stands for Global Recruitment & Consulting. The role of consulting has not been disclosed.

AIN.UA noticed that there was no press release or a pompous PR campaign, as it always happens in such cases. Later we learned that the reason for the rebranding of HH.UA was the deal: the company was completely absorbed by Ukrainian co-owners. It means that the local office of HH.UA no longer has anything to do with the company that recently went public in an IPO and, accordingly, the name.

AIN.UA publishes the details of the deal.

Transition logo

Headhunter LLC was registered by Ukrainian citizens back in 2004. Officially, the representative office of the Russian holding HeadHunter.ru kicked off in Ukraine a year later, in 2005. The peak of the site performance was 2013, the last year before the war in eastern Ukraine. Based on data from the company itself, MAU (monthly active users) of HH.UA in 2013 in Ukraine amounted to 2.5 million users. Work.ua showed the same result in 2013, and Rabota.ua had a million fewer users.

In February 2016, Mail.Ru Group sold HeadHunter with its Ukrainian office to a consortium of investors under the aegis of Elbrus Capital for $160 million. By that time the MAU of the Ukrainian website had plummeted to 1.6 million.

The May’s decree of President Poroshenko in 2017 blocked VK.com, Yandex.Ukraine, Mail.ru and many other Russian sites in a single day. HH.UA got lucky – the site was not included in the sanctions list. However, six months later, the parent company still decided to sell its Ukrainian business. HeadHunter Group PLC laid out this intention in F1 form in March 2018, as part of the preparation for an IPO on the NASDAQ exchange.

In May 2018, the Cyprus-based Headhunter FSU Limited, which owned 51% in Ukrainian Headhunter LLC, disappeared from the list of beneficiaries.

The director general Marina Makoviy and the director of business development Yuri Kostrykin, who both previously shared 49% stake in the company, became the owners of 100%. According to various sources, MAU in 2018 was somewhere between 1.2 to 1.8 million.

HH.UA did not comment on the details of the transaction but confirmed that at the moment 100% of Headhunter LLC is owned by Makoviy and Kostrykin.

Details of the transaction are disclosed in the 424B4 form submitted to SEC by HeadHunter Group PLC on April 26, 2018: 51% of Headhunter LLC was sold to minority stakeholders for 2.6 million Russian rubles, which at the exchange rate on the day of the transaction was about $42,000 – just over ₴1 million. According to the contract, the payment is divided into installments made according to the schedule from October 1, 2020, to March 31, 2023, against purchased stakes.

At the same time, the new owners of Headhunter LLC gave HeadHunter Group PLC exclusive rights to Ukrainian trademarks and domains and received a non-exclusive license to use them until May 2020. This is the reason and the deadline for renaming HH.UA into GRC. 

Logo after rebranding

$42,000 for 51% stake in the company — why so cheap?

Year on year revenue and net profit of HH.UA are presented in the table below:

Year

2013

2014

2015

2016

2017

Revenue

$1.2M

$0.8M

$0.48M

$0.52M

$0.67M

Profit

$0.109M

$0.046M

$0.009M

-$0.014M

$0.018M

* It can be assumed that the data from YouControl does not cover all legal entities involved in transactions, however, the data are confirmed in the above-mentioned form 424B4.

On the one hand, like all companies operating in the domestic market, the revenue growth in hryvnia (and HH.UA has revenue growth in hryvnia until 2017) turned out to be incomparable with the upsurge of dollar. The profit is brought to naught. On the other hand, the company’s annual lease of 150-200 sq.m. office at 15 Nyzhniy Val costs 1.5 times more than the price of the deal. In addition, the deal value also equals the combined monthly payroll of 25-30 employees. Is 51% stake in such company worth $42,000 or was there a back-door deal? AIN.UA doesn’t know for sure. Same applies to the answers to the following questions:

  • Why minority owners bought out such a business that is not growing in terms of dollar and locked in the domestic market with superior competitors? Almost a nominal price and earn-out installment model where part or all of the payment is made from the future proceeds of the acquired asset – this is actually the absence of negative consequences from the acquisition of the subject of the deal in the pessimistic scenario.
  • Why did the parent company sell the asset? Apparently, after the fall in 2014 and the subsequent cessation of growth in traffic, the Ukrainian market became unpromising and threatening to become inaccessible to the Russian parent company. Revenues from operations in Ukraine for 2017 and 2018 in the total revenue structure of HeadHunter Group PLC were 0.8% and 0.3%, respectively.
  • Why the asset was not on the open market, where third-party investors could buy it for a more “fair” amount? According to two sources related to the company, HH.UA was on the open market for about three years but had not been purchased for various reasons. According to representatives of several large companies in the job search market, they did not receive offers to purchase HH.UA.

Why does it matter?

The largest Ukrainian job search sites Work.ua and Rabota.ua swapped stakes in their businesses in September 2017 at the time when HeadHunter decided to sell its Ukrainian business. According to AIN.UA’s own sources, those were 30% stakes in each company. Both sites reported that this would not affect market competitiveness. But already at the beginning of 2018, both sites raised prices for their services and shrunk free inventory, thereby consolidating the market.

Nonetheless, HeadHunter.ua is still on the market. It has the traffic and the flow of paying employers. It is one of the three largest national job search sites, although it is seriously lagging behind the first two. And it is not part to any of the stake swaps known to AIN.UA. In 2020, the site will lose a recognizable brand and this will certainly affect the business. But if GRC (ex-HH.UA) returns and strengthens its hand, the company will be able to impact the market’s pricing policy.

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