When a company makes a big financial move I assume that they have a good reason to do so. Sometimes to the outside world it may not make sense, often because the outsider’s view of the world is different. These large companies have analysts that are studying markets and making projections well into the future. I assume they know something I don’t. So to me these financial moves can be quite interesting and if you study them they may actually tell a story of where these firms think the market is going.
Yesterday it was announced that Willis is buying Towers Watson. They say it is a merger but the Willis shareholders will own 50.1% of the stock. I read through numerous articles and interviews with their Executives to try and see if there is a story that is being told by this acquisition. More specifically I was looking to see if there are implications as it relates to the employee benefits business. There are a few quotes that hinted as to what these firms are thinking. In a Business Wire article Towers Watson Chairman and CEO John Haley said their reasons included, “accelerating penetration of our Exchange Solutions platform into the fast-growing middle market.” He added that they want a “significant presence with mid-market and smaller employers around the world”.
Willis CEO Dominic Casserly stated that Towers Watson’s market leading private exchange platform is particularly attractive.” And of course they both reference the efficiencies they will generate through a merged organization.
Keeping in mind that employee benefits is simply one part of these multi-national multi-dimensional companies this deal is more than likely about much more than just employee benefits in the U.S. However we can still speculate because that’s what others in the industry do. This happens in sports as we share our opinions as to why teams draft a certain player or trade another and it happens in business when key employees leave or companies make acquisitions. I guess it is human nature.
When I look at this acquisition on its own its hard to speculate as to the reasons, but when you look at other moves in the industry there may be a story developing about the future of the benefits business or more specifically the healthcare business. It was only a few years ago that Towers Watson bought Liazon and their private exchange solution for $215 million. Just last year Aetna purchased bswift for $400 million. I wrote about this acquisition last November in this forum. Now Willis buys Towers Watson. Are the events all tied together?
Back in 2011 Aetna CEO Mark Bertolini made the comment, “Not too far away from now – in the next 6-7 years – 75 million Americans will be retail buyers of healthcare. And they’ll come to the marketplace with their own money and either a subsidy from their employer or a subsidy from their government. And it doesn’t much matter – they’ll be spending their money.” Since then Aetna has been acquiring technology companies including bswift that has built “exchange” capabilities. Bertolini thinks healthcare will be individually purchased. Aetna buys exchange technology. Towers Watson buys exchange technology. Willis buys Towers Watson. Are these events part of the same story?
Maybe this is a stretch but if Mark Bertolini is right and in the near future Americans will be retail buyers then what would I need to do if I am a benefits broker and consultant? A 10,000 employee client could no longer be viewed as a single 10,000 person firm. It becomes a firm with 10,000 retail buyers that I may need to consult and support. The structure of my company. The technology I use. How I staff my business. The revenue/expense model that I would need to operate under in this type of business would need to be much different than that of the average benefits firm today.
Do these larger firms like Willis, Towers Watson, and Aetna see something most don’t see yet? Are they preparing for a different future where a consumer-centric “retail” model is the way health insurance will be purchased? Will the Cleveland Cavaliers resign Lebron James? Is this Peyton Manning’s last year? Who knows what they are thinking? What I do know is there is usually a story being written and many of us on the outside can only speculate as to what an acquisition like this means for the rest of the industry. And I am pretty sure that somewhere in the benefits world the next chapter of where the market is headed is being written.
To see a webinar on this topic click on this link:
The webinar is titled “Upping The Benefits Game – Introducing Ideas Most Brokers Aren’t Thinking About”.