Mark Trepanier, Managing Director, Human Resources Advisory Services
According to the July 12, 2010 Wall Street Journal, “Hewitt Associates, Inc. (NYSE: HEW) announced today that the boards of directors of both companies have approved a definitive agreement under which Hewitt will merge with a subsidiary of Aon. The aggregate consideration is valued at $50 per Hewitt share, which represents a 41% premium to Hewitt’s closing stock price on July 9, 2010”. The Journal further said, “Following the close of the transaction, Aon intends to integrate Hewitt with its existing consulting and outsourcing operations (Aon Consulting) and operate the segment globally under the newly created Aon Hewitt brand. In addition, Russ Fradin, chairman and chief executive officer of Hewitt, will serve as chairman and chief executive officer of Aon Hewitt reporting to Greg Case, chief executive officer, Aon Corporation”.
As with any acquisition scenario, there are opportunities as well as challenges. Here’s EquaTerra’s take:
- Hewitt will be part of an organization that is three times as big
- The combination will clearly be a benefits powerhouse with both benefits outsourcing and consulting
- There will be strong focus on leveraging the combined consulting capabilities of Aon and Hewitt
- Russ Fradin has driven Hewitt forward, and will continue to have a leadership role, so this is a “friendly” transaction
- The transaction will not close for another four to five months, so uncertainty will continue
- Clients may not be able to get clear answers on technology spend and contract issues during this period
- Aon has an unsuccessful track record in HRO, and HRO will only be 11 percent of the combined businesses, so commitment to this business line is uncertain
- Will senior Hewitt leadership be with the new entity for the long term?
- Aon’s strategy of synergies and cost reductions makes Hewitt’s intended investment plan (mainly technology) in the HRO business uncertain
- Aon is the survivor and buyer. Its culture will be the dominant one. Does that fit well with Hewitt clients?
Net/net: Existing or new (before the transaction closes) Hewitt clients should speak with their Hewitt account leadership to gain clarity on the relationship going forward. Many clients will have an opportunity to ensure commitments through their contractual consent/change in control provisions.
Looking for more? Read Service Provider M&A – Change of Control Doesn’t Have to Mean Loss of Control and the Chicago Tribune coverage of the acquisition.