Mellon HR Sale Imminent

Industry sources indicate that a deal to sell Mellon's HR consulting and outsourcing practice is imminent. The buyer will likely be either ACS or Convergys. IBM reportedly considered the acquisition, but decided against pursuing it. New and more formidable competitors are emerging from HR BPO consolidation, with more to come. "Today's market activity represents the intersection of opportunity for both IT consultancies and traditional HR firms," notes Derek Smith, the Director of Research with Kennedy Information.

Market changes began when IBM acquired a portion of PwC Consulting's HR business and Mercer acquired mid-market HR outsourcing firm Synhrgy. Now, among the more recent changes are Aon's alliance with CSC, Hewitt's acquisition of Exult and partnership with Capgemini, and EDS' acquisition of 85% of Towers Perrin's HR BPO operations.

To toot my own horn for a minute: I called ACS as a potential buyer back on February 1st.

The Decline and Fall of Kwasha Lipton

When I entered this industry 8½ years ago, Kwasha Lipton Consulting Group had been considered THE company to watch for many years. They were the undisputed leader in the benefits business; nobody else was even close. Ted Benna, who is widely credited with designing the first 401(k) plan in 1978, was a principal at Kwasha Lipton. Kwasha Lipton also pretty much invented the cash balance concept. [Kwasha Lipton, “Exciting New Retirement Concept: The Cash Balance Pension Plan”, Kwasha Lipton Newsletter, Vol. 18, No. 1, June 1985.]

January 1996 - Coopers & Lybrand acquired Kwasha Lipton Consulting Group.
July 1998 - Price Waterhouse and Coopers & Lybrand completed their merger to form PricewaterhouseCoopers, taking over the #1 accounting firm slot from Arthur Andersen. Soon thereafter, PricewaterhouseCoopers combined the former Kwasha Lipton operations with other benefits consulting practices to form Unifi.
January 2002 - Mellon Financial purchased Unifi. Soon thereafter, it merged Unifi and its Buck Consultants subsidiary with other operations to form Mellon HR Solutions.
January 2005 - Mellon HR Solutions is on the block.

That's a lot of getting shuffled around, re-organized, upsized, downsized, rightsized, supersized, mismanaged and just plain ignored in just nine years. No wonder this operation is only a shadow of its former self. From undisputed first, they've been relegated to the pile of also-rans and has-beens. It's really a shame.

Mellon HR&IS Operation on the block

Mellon Financial is looking for a solution for its Human Resources and Investor Solutions business. Pittsburgh-based Mellon has hired Citigroup to explore a possible sale of the business — which provides consulting, administration and outsourcing services — for as much as $1 billion, sources familiar with the matter said. HR&IS provides human-resources support in such areas as retirement, employee benefits and communications, as well as shareholder services such as mergers and acquisitions, corporate restructuring and employee stock-purchase plans. Sources familiar with the business say there is a limited pool of logical buyers for the entire operation, and it is possible the business may be sold in pieces. Potential suitors for all or part of the unit may include consulting firms Convergys, Hewitt Associates and Watson Wyatt, which would be particularly interested in the human-resources part of the business, sources noted.

[The article doesn't mention one other prospective buyer, ACS.]

Mellon HR&IS's revenue reached a peak in the first quarter 2002, following the acquisition of Unifi, but has declined steadily since.

MMC Settlement

Marsh & McLennan agreed yesterday to settle charges by New York Attorney General Eliot Spitzer for $850 million. Marsh & McLennan will set up a fund to pay restitution to policyholders, but the company neither admitted nor denied allegations it engaged in bid-rigging.

Sources: Forbes and MarketWatch