The Demise of the ING/Empyrean Deal: What’s Next for ING and the H&W Marketplace?

A recently posted Note from the CEO on the Empyrean Benefit Solutions website reads, “Empyrean spent three months evaluating and proposing on an acquisition of ING’s health and welfare outsourcing business. At the end of the process, we did not reach a mutually advantageous agreement with ING.”

The fact is that while there may have been other contributing factors, ING’s lack of a solid health and welfare (H&W) technology platform and the jumping ship or tendering for work of at least five of ING’s 11 H&W clients are what ultimately caused the deal to fail.

So what does this mean for ING and the H&W administration marketplace in the U.S.?

It is clearly damaging for ING. Its client base has shrunk and is likely to continue contracting. The resulting instability of its business is undoubtedly unsettling for its employees, and this will likely cause significant morale problems and staff exits, even if layoffs aren’t forced. The company could try and find another buyer, such as defined contribution administrators looking to grow their H&W businesses (for example Fidelity), or other H&W providers, e.g., Workscape, Hewitt and Watson Wyatt, hoping to increase share. Its only other option is to resign itself to losing its whole book of business to other providers.

We believe the latter will happen. It’s far more likely that other providers will look to pick up ING clients without the cash outlay to buy the business, especially in its unstable and dwindling state. But that said…

A cautionary note to H&W providers: be wary of taking on ING clients too quickly with first conducting appropriate due diligence on the contracts. ING has clearly had challenges servicing its clients, and that may not all stem from issues in its own operations. It’s worth paying close attention to the contracts it was bound to honor to ensure there are no hidden pitfalls such as unrealistic cost saving expectations or inappropriate governance structures.

And a word of warning to buyers: if you’re considering outsourcing to the H&W arms of a traditional defined contribution administrator, make certain the provider has made a long-term commitment to the H&W space, perhaps evidenced through investment in real-time decision support tools, self-serve enhancements and analytics technologies. A lack of robust commitment to fully servicing H&W clients may place you in a similar position in which your provider exits the business and you must unexpectedly transition to another supplier.

Until next time,

Helen Neale, Research Director, Human Resources Outsourcing, NelsonHall

Advertisements
Explore posts in the same categories: health and welfare administration, hr outsourcing, hr outsourcing research, hro, hro research, outsourcing research

Tags: , , , , , ,

You can comment below, or link to this permanent URL from your own site.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s