Benefits consulting firms Mercer and Callan Associates are creating a mega investment consulting shop, as the two have announced plans to merge their operations.

Mercer, a wholly owned subsidiary of Marsh & McLennan Cos. based in New York and with 18,000 employees, will acquire Callan, which employs 170, in an effort to strengthen its U.S. presence in the investment consulting space, as well as its position on a global scale. Callan is independently owned. The transaction is expected to close within the first quarter of this year, and the new firm will be known as Mercer, officials at both shops told IMW.

Mercer did not disclose the purchase price.

Gregory Allen, president at San Francisco-based Callan, said that from a personnel perspective, not much of a shake-up is expected. Certainly, each firm competes for consulting clients, with little overlap. Also, the deal doubles Mercer's presence in the U.S., as it only has 200 associates here, whereas all of Callan's employees are based in the U.S.

"The consulting business is an extremely labor-intensive business," Allen said. "If you add five clients, you need to hire a consultant. We're actually in a hiring mode. This is about creating the global industry standard. No layoffs are anticipated. This is very much a strategic merger."

Jeff Schutes, U.S. investment consulting leader at Mercer, explained: "Mercer Investment Consultant (Mercer IC) is a part of a larger Mercer. This merger only involves Mercer IC from a leadership standpoint."

Schutes said that Mercer Chairman and CEO M. Michele Burns would remain CEO at the firm.

"A key point to take away is that there will be no changes in our client teams," he said. "We do not want to disrupt our clients.

Allen, reiterated this, but recognized that clients of Callan may be a bit more sensitive to the transaction, given that the firm is being acquired.

"Our objective is to keep the client experience the same," he said. "We will have the same consultants covering the same clients. We are focused on servicing clients, and integration will be important."

Allen added that both firms would begin taking steps to ensure that clients on both sides see the benefit of the merger. One example of this is that Mercer clients will now have access to Callan's extensive library of white papers and research.

"This transaction is not economically driven," Schutes ensured. "It's driven to the benefit of our clients."

Callan, which is solely U.S.-based, has nearly $1 trillion in assets under management, Allen said. Mercer's U.S. operations have slightly more than $1 trillion in assets under management. However, Mercer's global assets under management total $43.7 trillion. Meanwhile, the announcement regarding the merger further states the reasoning behind the two firms teaming up.

"Clearly, this combination will position Mercer as one of the top U.S. leaders in investment consulting," said Mercer's Burns in the statement. "Callan's solid U.S. presence complements our U.S. investment consulting strength, along with our strong positions in Canada, Europe and Asia Pacific. This transaction demonstrates Mercer's commitment to invest in businesses that provide long-term strategic growth and in high-quality investment consulting services that benefit clients."

Callan Chairman and CEO Ronald Peyton added: "Callan has been a leader in the investment consulting industry for over 35 years in the U.S., and by combining forces with Mercer, a global leader, we can offer clients a wider range of tools and resources, top-notch professional advice and enhanced research, educational and quantitative services."

(c) 2009 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

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