By Jessica Marquez
LINCOLNSHIRE, Ill. — A recent Hewitt Associates Inc. filing has raised eyebrows about whether the company is contemplating a sale.
On Oct. 7, the Lincolnshire-based firm filed with the Securities and Exchange Commission to create a severance plan for its 24 top executives in the event of a change of control of the company. Under the plan, if these executives lose their jobs as a result of a merger or acquisition, they are each entitled to a lump-sum payment equal to two times their base pay and target annual incentive, among other things.
"What raised some questions about this is the timing," said Bill Zinsmeister, an analyst at Piper Jaffray & Co., Minneapolis. Creating change-of-control severance plans is standard practice for public companies the size of Hewitt, but it's curious the firm waited until now to establish the plan, he said.
Hewitt went public in 2002, opening it up as a possible takeover target.
Kelly Zitlow, a Hewitt spokeswoman, said the company is not considering a sale and this provision is just standard procedure.
"We know that it is a best practice to put one in place," she said. When asked why Hewitt didn't create the plan when it went public three years ago, Ms. Zitlow said management and the board of directors have been working together to set post-IPO priorities, and this is where the change-of-control severance plan fell.
It makes sense for Hewitt to prepare for the possibility of being acquired given that it has been a takeover target for years, analysts said. With all of the consolidation in the human resources consulting and outsourcing sector, many companies are looking at Hewitt as an ideal acquisition because it is the frontrunner in the market, said Michel Janssen, president of supplier solutions at consultant Everest Group, Dallas.
