Potential ExcellerateHRO Suitors: Who’s Suited?

In just the few short weeks since Hewlett-Packard repurchased all of Towers Perrin’s shares in ExcellerateHRO and the Watson Wyatt/Towers Perrin merger was announced, there has been considerable speculation on ExcellerateHRO’s fate. Will H-P retain it or put it up on the sales block?

H-P hasn’t demonstrated any interest in growing or even supporting its HRO business. And while ExcellerateHRO hasn’t made much headway in the multi-process HRO space, it’s a relatively strong player in benefits administration outsourcing. As a result, we believe – as do many in the marketplace –it’s a potential and solid acquisition target for providers who are already heavy into benefits administration or others interested in entering the space.

What does ExcellerateHRO have to offer potential suitors?

•  Its new technology investment in the BA7 platform, which offers enhanced self-service capabilities, allows for increased customization to enable benefits portals to look and feel more like the client company’s overall HR environment, provides more modeling capabilities, and gives plan sponsors improved reporting capabilities by enabling them to slice and dice data across multiple domains

•  34 million participants per claims of approximately 400 clients, the largest of which itself has 23 million participants

•  Strong experience in managing complex benefits administration relationships, e.g., companies with many different plan structures post M&A, grandfathered benefits, and those with complex formula calculations and offsets

•  Stock plan administration capabilities, which may see a requirement uptick as companies seek alternatives to salary increases

•  Flexible benefits administration capabilities in Europe, particularly in the U.K., which we estimate has high double-digit growth potential by 2013

•  About 20 clients in European pensions administration. European benefits administration business is estimated to generate approximately one quarter of the company’s revenue

All the above make ExcellerateHRO appealing to a select group of providers, especially those looking to bolster their technology capabilities in benefits administration and expand their geographic footprint beyond North America.

Who might be interested in acquiring ExcellerateHRO?

Fidelity, Hewitt and Mercer – to capture additional market share in the health and welfare and defined benefits/defined contributions spaces, as well as greater market share in the U.K. which will require additional servicing when auto-enrollment is introduced to pension schemes in 2012

Empyrean – following its failed ING acquisition, it may be interested in acquiring ExcellerateHRO’s health and welfare portfolio of business to gain more market share. The question in this scenario is what would happen to the remainder of ExcellerateHRO’s businesses? Perhaps they would be hived off to local providers in the U.K., e.g., Capita, and retirement administrators in the U.S.

ACS – the level of noise it has made in the HRO space following its launch of SyncHRO could signal acquisition interest. However, the integration challenges it faced with its purchase of Mellon might deter ACS from making another acquisition in the near-term

ADP – although highly speculative, it might be interested to enable penetration into the larger benefits administration marketplace and to gain defined benefits capabilities

Offshore BPO providers – ExcellerateHRO’s technology would provide the base for offshore BPO providers, most of who have acknowledged proprietary technology is an absolute must in order to effectively serve benefits administration clients directly, rather than as the offshore arm of an existing third-party benefits provider. However, a strong looming question is whether existing ExcellerateHRO clients would accept a purchase by an offshore organization, particularly if there was a threat that first-line contact for processes such as health and welfare were moved offshore

We’ll be keeping a close eye on developments on ExcellerateHRO’s destiny, and so encourage you to keep an eye on our HRO Insights blog for more on this and other hot topics!

Until next time, happy sourcing!

Helen Neale, Research Director, Human Resources Outsourcing, NelsonHall

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5 Comments on “Potential ExcellerateHRO Suitors: Who’s Suited?”

  1. ljtcs Says:

    interesting view

  2. kal Says:

    Does anyone know what has been happening with their leadership since Chris Rittenmeyer, head of ExcellerateHRO and son of former CEO Ron Rittenmeyer, was let go?

  3. AJ Says:

    Nice view! Why would you say that an acquisition by the offshore providers would not be received well? What if the acquisition happens are they would not move the staff offshore? What would you say the value of ExcellerateHRO be?

    • hjneale Says:

      Thanks for your comment.

      Clients already being served by EHRO, many of whom are benefits administration clients, would be concerned about the level of processes that would be “up for offshore transfer” if the purchaser was an offshore organization. Benefits administration has been slower to embrace offshore particuarly within the higher level voice processes, and benefits clients remain reticent, according to our research, about transferring too many services from on to offshore – an offshore purchaser would put the cat amongst the pigeons here for sure!

      As for the value of EHRO – thats not really something I can comment on as it’s very much to be determined after proper due diligence. But in the current marketplace, I would have thought that there may possibly be a bargain there for someone!


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