M&A - Towers Perrin, Watson Wyatt agree tie-up

Seattle-based actuarial consultant Towers Perrin and its Reigate-based peer Watson Wyatt have announced plans to combine, creating a multi-national consultancy to be named Towers Watson.

The deal, worth $3.5 billion (£2.1 billion) based on Watson Wyatt's share price on June 26 before the merger was announced, will see the companies become equal partners.

Watson Wyatt's shareholders will be eligible to receive 50% of the combined company's shares on a fully diluted basis, while Towers Perrin, whose shareholders are employees of Towers Perrin, will also receive 50% of Towers Watson shares.

Watson Wyatt chief executive John Haley will serve as chief executive of the combined firm, while Towers Perrin chief executive Mark Mactas will serve as president.

Mactas said the tie-up would create "great opportunities for growth", but one figure from a rival firm cast doubt on this analysis. He said: "The issue is that the combined Towers Watson will be restricted in the type of instructions it can take on. Previously Watson Wyatt could have advised one side of a deal and Towers Perrin the other, whereas now they can only work for one side."

Under the current merger roadmap, it will take three years to integrate both companies, at a cost of about $80 million, but the rival figure questioned whether the timing of the restructuring could prove poor.

He said: "The combined group is going to have to put a post-recession strategy together at the same time as it completes the restructuring. You have to question whether Towers Watson will be able to capitalise on the potential for growth as global economies pick up."