A "merger of equals," and other changes in the industry

by Vault Consulting Editors | June 29, 2009

  • My Vault

Riding the wave of recent restructurings, mergers and sell-offs, some of which have been brought about by the recession, others by bankruptcy and still others by some good old-fashioned fraud, Watson Wyatt and Towers Perrin—two of the largest HR consulting firms in the world—have announced a merger. Combined, the firms will supplant the current HR leader, Mercer, in size and scope, and will take on the name Towers Watson & Co. This particular arrangement can be attributed to recessionary shifts, with both companies facing lower-than-expected revenue, brought on primarily by diminished discretionary spending by clients and layoffs (the firms are paid based on the number of transactions or workers at the client company). While no mention was made of staff cuts that usually accompany such restructurings, it was announced that Towers Watson will employ about 14,000 people, which, if I'm doing the math correctly, doesn’t seem to eliminate many of Watson Wyatt's 7,700 and Towers Perrin's 6,400-plus employees.

That may be one of the factors that led the companies to bill this union as a "merger of equals"—a truly harmonious occurrence, should it actually happen so harmoniously. But maybe they'll pull it off, as company press releases harmoniously predict: The boards of both companies have unanimously agreed to the merger; the leaders of each firm will step up to joint leadership of Watson Towers (Watson Wyatt CEO John Haley will serve the combined company as CEO, and Towers Perrin CEO Mark Mactas will serve as president); the companies will be combining their management and sharing administrative expenses; the firms have complementary specialties—Watson Wyatt has a larger presence in pension consulting, while Towers Perrin has the health care arena covered; the deal is an all-stock transaction with no cash changing hands, and shareholders of each firm will have 50 percent of the new company; Towers Watson will find a new headquarters, likely somewhere between the two firms' current headquarters. Truly a merger of equals. One potential hiccup, however, could arise if the company provides executive comp consulting to the same clients for which it provides employer benefits consulting services.

Less a merger of equals than a fortunate bailout was the news last week that Tech Mahindra's April purchase of Satyam Computer Services will create a new brand: Mahindra Satyam. While the change seems to be little more than a cosmetic rebrand (Mahindra Satyam will operate as a standalone unit that much resembles Satyam, and nothing will change in the company's current legal status), it was accompanied by a change at the top. Interim CEO A.S. Murty was replaced by C.P. Gurnani, former head of Tech Mahindra’s global operations, sales and marketing functions. In a statement that is perhaps a sign of the times at Satyam, the firm pointed out that "Gurnani has no family relationship with any director or officer of the Company and as on April 27, 2009, did not hold any shares of the Company."

The reorganization seems to be a last-ditch effort to get Satyam's business off the ground; according to the Business Standard last week, Satyam stated that it would be eliminating 8,500 jobs (or 18 percent of its workforce) in six months if business does not pick up. What's the outlook? Well, according to analysts, it is "very negligible" that there will be enough work to go around to keep those 8,500 on board. So it looks like we'll continue to see Satyam's name in the spotlight for a while!

Filed Under: Consulting

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