Newspaper article The Evening Standard (London, England)

The Worst Merger since Time Warner and AOL?

Newspaper article The Evening Standard (London, England)

The Worst Merger since Time Warner and AOL?

Article excerpt

Byline: Anthony Hilton city comment

THE proposed merger between insurance broker Willis and pensions and benefits consultant Towers Watson may not yet qualify as the worst deal in history that accolade probably still belongs to Time Warner's purchase of AOL. But these are early days give it time.

Professional services firm Towers Watson has long been an organisation that defies management. It is staffed by people who generally speaking are far more interested in their relationship with their clients and using their professional skills than they are with being managed in to achieve some transitory corporate objective or other. That indeed is why the clients like them.

The role of the chief executive in an organisation like this is akin to herding cats. Some, by dint of their own personality and interpersonal skills, can actually drive the firm forward but they tend to be few and far between. More find that because the senior players in the firm own the client relationships, there is not a great deal the nominal chief executive can do to assert authority.

This is because it is a hallmark of professional services firms that the more money a partner or senior employee brings in, the less notice he takes of management. If these problems exist when a firm is on its own, they are magnified when it tries to merge with someone else. Indeed, it is widely believed that the only way professional firm mergers can have a chance of success is if they are limited in scale and ambition.

If the acquirer is massively bigger than the firm being taken over, those who don't like it either knuckle down or get out. But if the firms are of similar size, and the deal is being billed as a merger not a takeover, then forget it.

It simply means no one is in charge.

Thus even the split of board positions and of senior management roles so proudly announced as part of this deal is not a source of strength but of weakness. It reeks of a compromise and tough decisions kicked into the long grass in order to get the deal done.

What is curious is that these facts must be obvious to most of the people employed by the two firms, given they live with the reality every day, but they are going ahead anyway on the basis that this time it will be different. The idea of a culture clash does not seem to have occurred to them. They talk blithely of savings of $150 million (PS96 million) or so in five years when they are likely to lose that and more in staff and client defections in 12 months. Their competitors must be rubbing their hands with glee at the thought of the business soon to drop into their laps.

And that $150 million is a joke anyway. There is no mention of the additional costs of complexity, which are likely to more than dwarf those savings.

But as a more general point, no one goes into a takeover to make savings over five years they are made in the first 12 months or they don't get made at all. …

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