Updated
Mercer will acquire Callan Associates and will merge the investment consulting businesses of the two firms in about late March, both companies announced this morning. Terms of the deal weren’t disclosed.
The combined entity will boast roughly 1,100 investment consulting employees in 41 offices around the world.
Asked if the combination would entail layoffs, as both firms already have offices in cities such as San Francisco, Atlanta and Chicago, executives from both firms said there were no plans to cull either consultants or research staff.
In a telephone interview, Greg Allen, Callan’s president, said for a people-intensive business such as investment consulting, “you can’t take consultants with a full book of 15 to 20 clients and give them 30.” The goal will be to minimize any disruption for clients as the two big firms are integrated, executives said.
In a joint news release, Ronald D. Peyton, Callan’s chairman and CEO, said with Callan’s strength in the U.S. market and Mercer’s global reach, “we can offer clients a wider range of tools and resources, top-notch professional advice and enhanced research, educational and quantitative services.”
Charles Salmans, a Mercer spokesman, said the Callan Investments Institute, an educational forum that hosts conferences for member institutional investors and money managers, will be retained by the combined entity. Mercer had ended its own conference program amid heightened concerns about potential conflicts of interest in the wake of a market timing scandal that hit the money management industry from late 2003.
In a telephone interview with top Mercer and Callan executives, Jeff Schutes, Mercer’s U.S. investment consulting leader, said the two firms' combined investment consulting lineup would boast resources and “depth” unsurpassed in the industry.
Mr. Salmans said each firm brings roughly a 10% share of the U.S. investment consulting market to the table. With $4 trillion in client assets under advisement, the combined entity would be about twice the size of its next biggest competitor — Watson Wyatt Worldwide — with the heft making the combined entity an employer of choice in the industry, Mr. Peyton said.
Executives said initial feedback from clients this morning has been positive.
Callan’s Mr. Allen said for clients of his U.S.-focused firm, Mercer’s global reach should prove a big benefit. The enhanced scale should offer a number of advantages, from deeper insights on global trends to more relevant databases.
Some industry executives noted that scale could prove a two-edged sword. Economies of scale can be advantageous in areas such as back-office operations, but for other key services, such as finding the best active managers for clients, there’s a tipping point beyond which size could prove a hindrance, noted Timothy R. Barron, president and CEO of investment consultant RogersCasey Inc.
Callan executives said they have 175 financial professionals, while Mercer executives said they have 200 in the U.S. and another 700 elsewhere around the globe. Executives from both companies rejected speculation that the deal was designed, in part, to provide an exit strategy for a generation of Callan executives approaching retirement age.
