Towers Watson and Willis merger shows need for diversification

"...Towers Watson would have the HR-based clientele looking for insurance services."

The merger between Towers Watson and Willis, which is set to receive regulatory approval in early 2016, demonstrates the need for consulting firms to diversify their lines of business in a changing world.

“It is interesting in that it reflects pressure on the traditional consulting firms that stems from the decline in their defined benefit pension business,” said pensions consultant Bob Baldwin.

“Consulting firms have also been entering fields of work that are related to traditional actuarial practice but are distinct from it–HR and investment consulting, and enterprise risk management are cases in point.”

The merger between the two organizations was initially struck in June this year, with the aim to create a leading global advisory, broking and solutions firm by joining two complementary businesses.

“What they hope will arise is synergies, in terms of cross-selling of services between the different offerings that they provide,” said Greg Hurst, pension consultant.

“Willis would have a lot of insurance-based clientele that would be looking for HR services and Towers Watson would have the HR-based clientele looking for insurance services.”

While the two organizations complement one another, there is one small overlap, added Mariette Matos, counsel at Bennett Jones. “Avalon Consulting is owned by Willis.

“It is a small benefits consulting firm, and will be joining forces with Towers Watson, so there will be one less benefits consulting company out there.”

The initial deal, in June 2015, valued Towers Watson at $8.7 billion, which was seen as too low and shareholders rejected the offer.

In November, the companies amended their merger agreement so that Towers Watson shareholders would receive a one-time cash dividend of $10.00 per share pre-closing. The new offer valued Towers Watson at $8.9 billion and shareholders signed off on it in December.

The merger is expected to close in 2016. Both Towers Watson and Willis are unable to make public statements about the deal until it receives regulatory approval.

This article first appeared on our sister publication, Benefits Canada.

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