HeadHunter Decides to IPO in the US: The Story of a Company That Has Increased in Value 11 Times in 11 Years

Recruitment company HeadHunter expects to receive a valuation of $675 million in an IPO on Nasdaq. This is the first placement of a Russian company abroad since 2017. Since 2007, when Alisher Usmanov and Yuri Milner invested in HeadHunter, the company's value has increased 11 times.

The deal. HeadHunter plans to place 32% of its capital on Nasdaq in the form of American depositary shares, each of which corresponds to one common share, the prospectus says. The deal amount may exceed $253 million (if the placement goes through at the upper limit of the range — $550–675 million for the entire company). This money will be received by the owners of HeadHunter — Highworld Investments funds (a division of Elbrus Capital, which holds 59.99% of the shares) and ELQ Investors VIII (an investment division of Goldman Sachs Group, which holds 40%).

The IPO organizers — Morgan Stanley, Goldman Sachs, Credit Suisse, VTB Capital, BofA Merril Lynch and Sberbank CIB — will receive a 30-day option to buy 5%.
The company plans to hold an IPO in May. The road show will run from April 26 to May 7.
HeadHunter announced its intention to go public back in December 2017. In the spring of 2018, the company was preparing for the listing, but in April the US tightened sanctions and the deal had to be postponed.

History. HeadHunter has an interesting history . The company was founded in 2000 by businessman Mikhail Frolkin and was then called National Job Club.

In a recent interview with Russkie Norm!, Frolkin said that he decided to start his own business simply because he needed money, copying all the basic rules from the recruiting company Ankor, where he worked at the time. “It was very logically structured inside. Little depended on the founders’ daily decisions, but there were rules. In this sense, Ankor was an easily copied business. When I left, I simply copied these rules,” he admitted. The rules meant everything, starting with what percentage a recruiter should receive.

https://www.youtube.com/watch?v=5YdABVM4xe8

At the time of the company's creation, Frolkin was 25 years old. To start the project, he "went through those clients" who knew him, and received his first order personally from Mikhail Fridman - the advance payment from him was enough to launch the business, although Frolkin was never able to fulfill the order.

Quote: “ Oh, there was a whole story there. I had a very nice first order. Mikhail Fridman personally gave me an order to find the chairman of the board of Alfa-Bank and paid an advance payment. He called Ankor, asked for a recruiter, I came to him, I found someone for him, I don’t remember, and then he came to me with this. And I had just quit Ankor, took an advance payment from him and created my company with Fridman’s advance payment. The worst thing is that I didn’t fulfill his order. But I took the advance payment.” But this did not affect the relationship - subsequently Frolkin, according to him, worked a lot for Alfa.

The startup's main investor was ultimately Digital Sky Technologies of Yuri Milner and Alisher Usmanov (now Mail.Ru Group): in 2007, they acquired the first 24.5% of HeadHunter shares for $15 million, and by 2012, they had increased their stake to 100%, spending another $49 million on it. In 2016, Mail.Ru Group sold the service to the Elbrus Capital direct investment fund for 10 billion rubles.

How HeadHunter grew. HeadHunter is now the leader in the Russian recruitment market, and the service is among the top 3 most popular recruiting sites worldwide. By the end of 2018, the service's audience had grown to 20 million unique users. The company's valuation has grown approximately 11 times since 2007 by the time of the IPO - during the first deal with DST, HeadHunter was valued at $61.2 million, and during the placement, its value may exceed $670 million.

Last year, the company's revenue grew by 29%, to 6.1 billion rubles, net profit almost 2 times, to 1 billion rubles, and adjusted EBITDA amounted to 2.8 billion rubles.
In the future, HeadHunter plans to expand its presence in the Russian market by acquiring smaller cities and competitors. According to Talantech forecasts, by 2025 the market volume may grow from the current 10 billion (estimated by J'son & Partners) to 24.5 billion rubles.

Why it matters. This is the first IPO of a Russian company abroad since 2017. Last year, bankers and consultants did not advise Russian clients to stay abroad due to sanctions risks and actively worked on buyback and delisting programs from international exchanges. And many followed the advice: for example, Megafon left the London Stock Exchange (although its motives are not entirely clear).

Find out more. After selling HeadHunter, Mikhail Frolkin unexpectedly became a leading player on the Vietnamese Internet - you can read about how this happened here .