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Are we seeing the return of "merger Monday"? Well, today there is a big deal: Towers, Perrin, Forster & Crosby Inc. and Watson Wyatt Worldwide Inc. (NYSE: WW) have agreed to a $3.5 billion merger (the equity will be split 50-50). The new entity will be called Towers Watson & Co.
These companies are major operators in the benefits-consulting space, which has been under pressure during the recession. So, why not strengthen things with a tie-up?
No doubt, Towers Watson will have significant scale; that is, in excess of $3 billion in annual sales. And, of course, there will be opportunities to slash away at the cost structure (the estimate is about $80 million in annual expense reductions). Oh, and there should be synergies, such as with cross-selling. For example, Towers Perrin has a strong health care business and Watson has a large business in pensions/retirements.
With its larger size -- and publicly traded stock -- Towers Watson will probably not stop its merger ambitions, especially if the recession continues to linger.
However, such major deals can be tough to pull off. In fact, Wall Street is fairly skeptical on the prospects of the deal, as the shares of Watson are down nearly 10% to $37.14 in early trading.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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