Federated spokeswoman Meghan McAndrew told PLANSPONSOR.com that the two companies have executed a letter of intent to do the deal, which McAndrew said is scheduled to be completed by early 2006.
McAndrew would not reveal the price tag on the deal, or the number of clients and assets under management that would be involved. She said that 70 Federated Retirement Plan Services employees will be affected. A core group is slated to stay at Federated to help in the transition while the rest could be offered positions with Great West or elsewhere in Federated.
She said that the proposed deal calls for the transferring of the recordkeeping function, and Federated will retain the rest of its existing retirement plan services including client relations and education/communications. McAndrew explained that the two sides have not yet worked out the operational details of the conversion of plans from Federated’s proprietary recordkeeping platform onto that maintained by Great West – particularly how it will affect participant transactions during the transition period.
By offloading its recordkeeping responsibilities, McAndrew said Federated can more closely focus on its core service offerings to plan sponsor clients. “Federated remains thoroughly committed to the retirement services business but is changing our service model,” McAndrew told PLANSPONSOR.com.
As of the latest PLANSPONSOR recordkeeping survey, Federated Retirement Plan Services had $2.8 billion in retirement assets under management, 611 recordkeeping plans, and 93,007 participants. Great-West Retirement Services had $64 billion in recordkeeping assets, 12,401 recordkeeping plans, and 2.5 million participants.
Great West spokeswoman Lisa Gigax declined comment on the transaction Friday.
Great West has been active in recent years on the M&A front. For example, last year American Express awarded a bid for outsourcing its mid-market recordkeeping services to Great-West, after considering proposals from a field of 23 providers (See Amex Pulls Cover Back on Mid-Size DC Product ). In November 2003, Great West and Wells Fargo announced a partnership on a small company plan offering (See Great-West, Wells Fargo Team Up For Small Plan Product ).
Industrywide, some of the M&A frenzy in the RK world apparently cooled a bit in 2005. Despite some deals, such as Merrill Lynch’s purchase of AMVESCAP’s recordkeeping operation, the Principal Financial Group’s pickup of ABN Amro’s defined contribution services area, and Wells Fargo’s acquisition of Strong’s defined contribution practice, the past year has been relatively quiet (See Cover: Feint of Heart ).
Earlier this month, Ameriprise and Aon announced an HRO joint venture that includes provision of recordkeeping services (See Ameriprise and AON Join Outsourcing Forces ).
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