Irvine Online Search Firm Going Public

In an effort to carve out a bigger chunk of the growing Internet recruiting business, an Irvine online executive and professional search firm will seek to raise $75 million through an initial public stock offering.

LeadersOnline Inc., a subsidiary of leading executive search firm Heidrick & Struggles International Inc. in Chicago, said it plans to use proceeds from the stock sale to step up its marketing efforts and improve its Internet technology, among other things.

Founded last year as a division of Heidrick, which itself went public last April at $14 per share, LeadersOnline offers online recruitment and placement services for companies looking for mid-level executives and professionals. The company has provided Internet-based recruiting services to 110 companies in the U.S. and Europe, including Andersen Consulting, E*Trade and Hartford Computing Group, according to the document filed Monday with the Securities and Exchange Commission.

Heidrick, which now owns 96% of the company, will continue to be the majority shareholder after the offering.

LeadersOnline said it had a net loss of about $5.2 million in 1999 on revenue of $2.6 million. It has 59 employees, according to its filing.

The company believes its relationship with Heidrick, combined with the “highly fragmented and underserved recruitment market” for its target customers, will work to its advantage.

The move also should boost Heidrick & Struggles because LeadersOnline will no longer be a drag on its parent, said Arnie Ursaner, managing director of CJS Securities in White Plains, N.Y. Last year, Heidrick earned $5.8 million on sales of $415.9 million. The company’s stock closed Monday at $36.13, up 13 cents a share, in Nasdaq trading.

After the public offering, Heidrick may continue to own at least 80% of LeadersOnline stock, Ursaner said. Heidrick and LeadersOnline executives declined to comment.

The planned public offering comes at a time when the online recruiting market is booming. Over the next four years, the market is expected to grow almost 60% annually, moving up to an estimated $1.7 billion in 2003 from from $265 million in 1999, according to Forrester Research, a market research firm in Cambridge, Mass. In recent years, several online recruiting companies have sprouted up, including Monster.Com, HotJobs.com and HeadHunter.Net Inc.

“There are hundreds of Internet recruitment firms out there, and their numbers are growing every day,” said Nell Fields, vice president of global marketing for Sherman Oaks-based Futurestep, a wholly owned online subsidiary of executive recruiting giant Korn/Ferry International.

Futurestep, which was established in 1998, has more than 350 employees and is LeadersOnline most direct competitor.

LeadersOnline faces a big challenge in its quest to become a dominant online executive and professional search firm. “The entry of new competitors or the expansion of the service offerings of our existing competitors will likely harm our business and financial condition,” the filing said.

LeadersOnline’s chief executive is Michael Christy, who joined Heidrick & Struggles in 1988 and became managing partner before moving to LeadersOnline. Patrick S. Pittard, the online company’s chairman, is Heidrick’s president and chief executive.

Two weeks ago, LeadersOnline was hired by the Gartner Group of Stamford, Conn., to help fill 366 positions. The contract is valued at $10 million.

LeadersOnline did not reveal how many shares it would offer the public or at what price. The company hired Goldman, Sachs & Co., Lehman Brothers and Wit SoundView to market its shares to the public.

LeadersOnline plans to trade on the Nasdaq market under the ticker symbol “LDRS.”

Bloomberg News contributed to this report.