Big cuts coming at Towers Perrin Watson Wyatt combination?

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The merger between Watson Wyatt and Towers Perrin to create the world's biggest pay, benefits and investment benefits consultancy has understandably created something of a stir in the industry this week. The firms are looking to save $80m in "synergies", which is going to involve some job cuts due to overlaps, so how will this affect the UK operations?

On the face of it, it's a match made in heaven. In the UK, Watson Wyatt is best known for its benefits, investment consulting and actuarial practices, while Towers Perrin excels in remuneration consulting.

However, one analyst says there's likely to be clashes elsewhere: "In the UK there's an obvious overlap in that they both have life, general insurance and benefits consulting practices and Towers also has an actuarial practice. There's going to be an obvious question mark over whether there's duplication."

Watson has by far the larger workforce here – around 3,000 across Europe with the majority based in the UK. Towers, meanwhile, employs 824 in the UK.

Towers Watson & Co – the new combined entity - insists it will offer clients a "deeper talent pool" and that there will be an "expanded set of career opportunities" for its staff. But Watson Wyatt chief executive John Haley also confirmed there would be job cuts, without giving any further details.

At the moment, there's a lot of uncertainty and staff have been tentatively exploring other options, suggests Tony Deacon, director of actuarial and pensions recruitment firm The Emerald Group.

"We've spoken to 15-20 people from those two organisations today alone," he says. "There's a lot of uneasiness, but it's too early to say we've seen any sort of exodus. I think there will be some movement at the junior end, but none at the senior end until there's more clarity."

He adds that the two firms are "particularly well-resourced in Europe" and that competitors would gladly capitalise on any fallout, especially around the insurance consulting sector which is actively recruiting at the moment.

However, there's the possibility there could be more consolidation within the industry going forward.

"Hewitt could be an acquisition candidate given its strong benefits outsourcing platform, particularly since it has stabilised most of the human resources business process outsourcing business, though that business still loses money," Stifel Nicolaus analyst Shlomo Rosenbaum said.

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