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The $3.5 billion merger could have a major impact on the HR management profession by creating one of the largest global consulting groups that specializes in HR and human capital management. The newly combined company will be called Towers Watson & Co.
Both Towers Perrin and Watson Wyatt provide a wide array of HR consulting services from nearly 200 offices around the world. The exact details of the merger were not released, so it is unclear which offices the new company might be closing or combining. During a press briefing, John Haley, Watson Wyatt’s CEO, told reporters that some jobs would be cut to reduce costs and redundant positions.
Haley, who will serve as CEO of the newly combined company, said the headquarters of Towers Watson would not be located at either of the current locations, but he added that the new home office would be located somewhere in the Northeastern United States. Watson Wyatt’s headquarters are located in Arlington, Va., while Towers Perrin has its headquarters in Stamford, Conn. Mark Mactas, CEO for Towers Perrin, will become the president and chief operating officer of the new company.
Towers Perrin has nearly 6,500 employees while Watson Wyatt employs approximately 7,700 people. Sources familiar with the merger said the new company would have nearly 14,000 employees worldwide with annual revenues of nearly $3 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,” Haley said. “The combination will further strengthen our core service lines while offering our clients an enhanced portfolio of proven offerings across a range of financial, risk and people management areas.”
Prior to the merger, Watson Wyatt had lowered its earnings forecast for 2009, which led many analysts to speculate the economic slump led the two companies to merge as a way to cut costs and deal with an economic slump that has forced many businesses to reduce spending on consulting services. In May 2009, Watson Wyatt officials reported that consulting services to help clients manage costs, reduce risks and comply with government regulations were in demand and doing well. However, the revised earnings forecast showed that the economic slowdown had adversely affected the company’s consultant practices, which depend on shorter-term and discretionary spending from clients.
Watson Wyatt’s Chief Financial Officer Roger Millay reported that revenue from the company’s human capital consulting service, which focuses on executive pay and talent management, was projected to decline 25 percent during the third quarter of 2009.
“This is an important transaction for our respective organizations that positions us well for a future of accelerated growth and higher levels of profitability,” Mactas said. “The fit between our firms is excellent, starting with a deep commitment to client service.”
Several sources familiar with the issue said that the merger could raise potential conflict of interest situations if Towers Watson offers executive compensation consulting services to businesses that have also contracted with the new company to consult on employee benefits issues.
The stockholders of the two companies must approve the merger before the deal is final, according to officials with Watson Wyatt and Towers Perrin. The merger is also subject to regulatory and competition reviews in the United States and other countries where the two companies now operate. A joint statement released by the two companies said that a shareholder vote on the merger would most likely be held during the fourth quarter of 2009.
Bill Leonard is senior writer for SHRM Online.
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