Towers Perrin, Watson Wyatt Merge
Towers Perrin, the privately held New York-based human resources and risk assessment firm, will merge with Watson Wyatt, a Virginia-based competitor, in a $3.5 billion merger of equals that will create the biggest consultancy in the world.
Watson Wyatt shares traded down more than 7% to $37.97 this morning, although analysts offered a bullish long-term view that also predicts continuing shakeups for the industry.
“Near term disruption from the merger might help competitors like [Hewitt Associates], Mercer and Aon,” said a report from Stifel Nicolaus posted at Thomson Analytics. “Longer term, we expect the combined entity to be a more formidable competitor in the larger HR consulting space.”
The report went onto predict competitors like Aon or Marsh & McLennan—Mercer’s parent company—could make M&A moves to bolster their own operations at a time when they face a new behemoth competitor. The report also called Hewitt Associates a potential target, thanks to its outsourcing capabilities.
Watson Wyatt’s chief executive, John Haley, will be the combined company’s CEO and Towers Perrin chief Mark Mactas will be president; the merged unit will go forward as Towers Watson.
The merged company is expected to have annual revenues of $3 billion and plans on immediate $80 million in pre-tax synergies.
The deal will allow the company to extend its geographic reach into North America, Asia-Pacific, Latin America and EMEA nations.
Goldman Sachs is acting as financial advisor and Milbank, Tweed, Hadley & McCloy is acting as legal advisor to Towers Perrin. Banc of America Merrill Lynch Securities is acting as financial advisor and Gibson, Dunn & Crutcher is acting as legal advisor to Watson Wyatt.
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