By Dirk Olin
I had only landed in Chicago a few hours before I heard the news: Aon had just plopped down nearly $5 billion for Hewitt Associates. I previously had scheduled meetings with each of the principles—and each had been, well, circumspect about the agenda. Now I knew why.
The merged entity had various constituencies to address as the news broke. Although the deal nearly triples the size of Aon’s consulting business, its shareholders, perceiving overpayment, punished the insurance brokerage firm. (Hewitt’s stock, meanwhile, spiked.) More important, perhaps, were the clients of each shop, who needed to be reassured that their standard of service would be maintained. And, making the entire process yet more delicate, the Securities and Exchange Commission (and, perhaps, antitrust regulators) would be vetting the deal over time.
Although hardly shrugging off the financial dynamic, analyst Phil Fersht raised other complications. “I’m concerned with the impact on Hewitt’s culture and brand, which has been steeped in HR consulting for more than four decades,” he said. “While on paper, I can see some minor synergies in terms of scale, geographic presence, and financial offerings, one has to question their two very different cultures and the potential impact on Hewitt’s consulting and managed services offerings once the Aon corporate machine gets its claws into them.” Fersht suggested that Hewitt would have benefited more significantly from adding a provider with deep technology integration expertise.
Of course, there was no guarantee that Aon’s strategists in the loop were not even then contemplating a broader buying spree. But Aon’s chief spokesperson, David Prosperi, told me the deal brought major benefits even without further acquisitions. “What it means for Aon’s consulting, risk, and reinsurance clients,” he said, “is that they will be the beneficiaries of a more complementary portfolio across consulting, benefits outsourcing, and HR business process outsourcing. Clients of Hewitt Associates will benefit from access to Aon’s analytics capabilities, our deeper footprint in healthcare brokerage, and access to our McLagan and Radford brands. McLagan provides advice to Aon consulting clients on market pay and performance information, and Radford is the leading provider of compensation market intelligence and services for the technology and life sciences industries.”
Declining to comment on the prospect of any future moves, the Hewitt brain trust in
Lincolnshire (a suburb roughly one hour north of the city) sang to me from the same hymnal. “In the case of this merger, there really aren’t large hurdles or challenges to overcome,” said Kristi Savacool, Hewitt’s senior vice president of Large Markets Benefits Outsourcing. “In fact, the complementary nature of the markets that are served—Hewitt being largely focused on the large market, and Aon focused on the mid-market—the complementary geographies—Aon being highly present in the international markets more so than the domestic and, in turn, Hewitt having a large North American presence and a smaller European and international presence—when you bring those together, you have a highly complementary set of circumstances.” (To watch a full interview with Savacool, please go to hrotoday.com.)
In an outsourcing world that has seen IBM and Xerox and NorthgateArinso vacuum their way to new gigantism, such an expansion might well have been a matter of fate. Whether bigger is better remains to be seen, but bigger certainly seems inevitable.
