Willis Tower (formerly Sears Tower) is now very appropriately named after the $8.7 billion acquisition of Towers Watson. The acquisition — which feels more like a merger given the relative equal market capitalization of both companies — comes at a time of extreme change to traditional models of human resources and benefits consulting and insurance brokers.
Though there are some financial issues (the acquisition price per share for Towers Watson was actually below the market rate at the time of the announcement) and tax considerations (Willis Group is based in Ireland, and the combined company should be able to apply a very friendly tax structure to its business), The Wall Street Journal and a few other outlets have covered it in great detail.
This deal follows the trend of consulting firms increasing their services and value and tightening their relationships with upstream and downstream providers. There are three lessons for HCM vendors to learn from this week’s acquisition — certain to be one of the largest of the year.
1. Consultants are here to stay
Any HCM organization that sells into benefits and to a lesser extent, total compensation and rewards, has dealt with a number of consultants. Now, other areas are coming into play as consultants increase their reach into organizations. I’ve often heard them ask, “How can we avoid working with the middleman in this situation?”
Tough news: You can’t. With Towers Watson increasing its consulting value and likely footprint with this deal, the new Willis-Towers Watson and competitors are going to be around for a long time.
If your organization hasn’t already, it’s time to put together a true engagement strategy for the times you will have to work hand in hand with consultants and end buyers.
2. HCM providers must market to consultants
The time for treating consultants as simple sales-channel partners is quickly coming to a close. In its place is a sophisticated co-buyer of HR technology that has the other advantage of seeing into hundreds of transactions, implementations, and rollouts a year.
This means organizations have to develop specific messaging and campaigns for consultants, aimed at their attitudes, behaviors, and beliefs. The appeal of your technology to an end client may be completely different from a consultant who is working on the buying and implementing side of the deal.
3. Look out for those blurred lines
Towers Watson not only provides HR and benefits consulting services. It also has talent management software as part of its offering. Now, of course, it will have insurance and risk advisory services at its fingertips as well.
We wouldn’t be surprised if Willis-Towers Watson continues to make vertical and complementary acquisitions after this deal settles. In fact, there might be an opportunity to grab more technology (think benefits administration, payroll, core HCM) that entices more buy-in opportunity for HR.
In the very near future, there’s a good possibility that for some HCM providers, Willis-Towers Watson will be a partner, buyer, consultant, and competitor — sometimes simultaneously. It probably doesn’t require a shake-up today, but be warned that it could be a possibility sooner, rather than later.