Hewitt Associates will acquire Ennis Knupp & Associates, creating a global investment consulting heavyweight with nearly $3 trillion in assets under advisement, according to executives from both firms.
Terms of the deal were not disclosed.
The combined investment consulting business will be called Hewitt Ennis Knupp.
The move marks Hewitt’s second involvement in industry consolidation in just over a week. On July 12, executives from Hewitt and Aon Corp. announced that Aon will buy Hewitt for $4.9 billion in cash and stock.
“We’ve been looking for some time to grow our capabilities around the world, especially in the U.S.,” and Ennis Knupp was just a “wonderful fit for our firm,” Ari Jacobs, North American retirement strategy and solutions leader for Hewitt said in an interview.
In a separate interview, Stephen Cummings, Ennis Knupp’s president and CEO, likewise said Hewitt was a perfect fit with his long-term plans for Ennis Knupp’s business.
Richard Ennis, a leading figure in the investment consulting industry who helped found Ennis Knupp 29 years ago, will retire, Mr. Jacobs said.
Mr. Cummings said that more than two years ago, he laid out “a pretty aggressive long-term vision” for Ennis Knupp’s board, with the goal of transforming a U.S.-focused firm into a “leading global provider of investment consulting services.”
Pensions & Investments’ latest investment consulting industry survey showed Hewitt ranking sixth in terms of worldwide institutional assets under advisement, with $950 billion as of June 30, 2009, but only 15th in terms of U.S. institutional tax-exempt advisory assets, with $151 billion.
By contrast, Ennis Knupp’s $970 billion in U.S.-only institutional tax-exempt assets was third in the U.S. rankings and fifth place for the worldwide rankings.
Now, Ennis Knupp’s assets under advisement have doubled to $2 trillion, buoyed by market gains, advisory work for government-related entities and a number of sizable new clients— including the $82.5 billion New York State Teachers’ Retirement System, Albany, and the $44.2 billion Massachusetts Pension Reserves Investment Management Board, Boston.
Mr. Cummings, who will be the CEO of Hewitt Ennis Knupp, said the synergies between the two firms extend beyond the U.S.-international combination. Ennis Knupp has spent the past five years developing expertise in alternatives areas, including private equity, real estate and hedge funds, with capacity to serve more clients in those areas. Hewitt hasn’t built up its capabilities to the same extent and has a number of clients looking for more advice, he noted.
Meanwhile, Hewitt has a suite of sophisticated pension risk management services, as well as a global research capability and a “delegated consulting” business — two areas Ennis Knupp was dedicated to building in the future, Mr. Cummings said.
Mr. Cummings will report to Mary Moreland, Hewitt’s North American retirement and investment consulting leader. Other senior executives, including Bradley Smith, the leader of Hewitt Investment Group, will serve as principals, reporting into Mr. Cummings.
Mr. Jacobs said there are no plans to reduce staff, outside of a few overlapping support roles. He said Ennis Knupp’s 42 equity holders unanimously agreed to be bought out.
In an e-mailed response to questions, Aon spokesman David Prosperi said the Hewitt-Ennis deal won’t affect the details of his company’s offer to Hewitt shareholders of $25.61 in cash and 0.6362 of a newly issued Aon share for each Hewitt share. “We were aware of this (Hewitt-Ennis Knupp) agreement as part of our due diligence,” he said.
