Consulting firms combine forces to become Towers Watson
Consulting firms Towers Perrin and Watson Wyatt are joining forces to become Towers Watson, in a deal worth about US$3.5 billion.
“The combination of Towers Perrin and Watson Wyatt into Towers Watson will create one of the world’s leading professional services firms, well-positioned for sustained growth and profitability across all geographies and business segments,” said John Haley, CEO of Watson Wyatt who will serve as CEO of the combined company. “Towers Watson will have tremendous global reach and service breadth to meet the growing needs of the world’s largest multinational corporations.”
Called a merger of equals, the “business fit between Towers Perrin and Watson Wyatt will be complementary, and together we will have an enhanced ability to offer a broader range of services and a wider global footprint,” said Marc Mactas, CEO of Towers Perrin who will become president and COO of Towers Watson.
Based on 2008 revenues for both companies, Towers Watson’s business will be based largely in North America (56 per cent), followed by Europe, the Middle East and Africa (37 per cent), Asia-Pacific (six per cent) and South America (one per cent). Revenue by segment is estimated to be dominated by benefits (55 per cent), risk and financial services (23 per cent) and talent and rewards (20 per cent).
The deal could cause a potential conflict of interest if the new company provides executive compensation consultancy to the same clients that provide the company millions of dollars in revenue for employer benefits consultancy services, said Reuters. Executive compensation has become more controversial in the past few months, coming under intense scrutiny by the United States government in light of recent federal bailouts.
The deal, which will create a combined company with annual revenue of more than US$3 billion and a possible workforce of more than 14,000 employees, could put pressure on rivals such as Hewitt Associates and Mercer, which is a subsidiary of Marsh & McLennan Companies, said Reuters.
Watson Wyatt last month lowered its profit and revenue outlook for the full year last month, saying projects directly tied to helping clients manage costs, mitigate risks or meet regulatory requirements were doing well but divisions that rely on shorter-term, more discretionary contracts, were hurt by the slowdown in the economy, said Reuters. But the company expected demand for services in its human capital group — which covers executive pay and talent management — to continue to decline. Revenue from that group fell 25 per cent in the third quarter.
