Merger: Friends Provident and Resolution will join forces as Friends Financial in Q4 of 2007
By Lucy Quinton
Friends Financial is the new big brand name to watch as two monster providers, Friends Provident and Resolution, are set to merge this autumn.
While the holding company name for the combined group is Friends Financial Group, the Friends Provident name will be the primary brand for UK life and pensions market operations after a transitional period. The Scottish Provident name will be retained.
However, Clive Waller, senior partner at CWC Research, added: "You don't save £100m by keeping duplicate lines open so I assume we will see some rationalising at some point."
According to Alex Child-Villiers, spokesperson for Resolution, the protection sectors were one of the attractions of this merger. "Both companies conduct a different type of business so it is business as normal with regard to this".
A head of protection has yet to be announced.
The two companies complement each other with their products, customers, distribution, financial profiles and management.
However, Waller said: "This is one of those mergers that looks good on paper, but with regard to our market, looking at past experiences little good seems to come out of it. Looking empirically too, there is no evidence that these mergers create shareholder value either."
Peter Le Beau, managing director of Le Beau Visage, said: "These are two excellent protection companies and they may feel that the economies of scale mean they can achieve and make a merger a compelling prospect."
Friends Financial will benefit from Friends Provident's customer base of around 2.5 million and Resolution's customer base of approximately 7 million.
The Friends Financial board of directors will jointly be drawn from the boards of Friends Provident and Resolution. Clive Cowdery will be chairman and Sir Adrian Montague will be deputy chairman. Mike Briggs will be chief executive and Philip Moore will be deputy chief executive.
The group's headquarters will be Resolution's current head office in London. It is intended that the key operating locations will be maintained.
It has been speculated that several hundred jobs from a combined workforce of about 6,500 are expected to be cut as a result of the merger. However, the number of redundancies has not officially been disclosed and Child-Villiers added they were not a big part of the merger as it was all about growth.
James Ward, director of marketing at Friends Provident, said: "Where there are redundancies, our primary focus will be non-compulsory staff reductions from natural turnover."
This is the second wave of merger discussions to take place in recent times after it emerged earlier this year that Royal London and Royal Liver were in talks. Le Beau added that mergers were by their nature very imprecise things but said: "I think if it is done successfully a protection powerhouse could emerge."
He added that, when the report on the savings gap was written, it highlighted a measure of market consolidation indicating that the UK market was relatively unconsolidated compared to banking and retail industries. Based on this, Le Beau added: "I expect we are likely to see continual merger activity in the sector driven primarily by cost but also by strategic fit."
