On Friday, Wells Fargo Insurance Services, a division of Wells Fargo & Company (WFC), disclosed the completion of the acquisition of New Jersey-based Procomp Benefit Resources Inc. in early September. The financial terms of the deal were not disclosed.
Established in 1997, Procomp is an employee benefits brokerage and consulting firm. The company provides employee benefits, voluntary benefits, individual life and disability, and retirement services to middle-market and large employers. The company aims at improving health while reducing the cost of healthcare.
Following the closure of the deal, Wells Fargo will get the advantage of experienced employees of Procomp, whose working style matches the company’s business model. Moreover, Wells Fargo’s position will be strong in New Jersey and its clients will get financial help according to their insurance needs.
Concurrently, joining hands with Wells Fargo Insurance Services boosted Procomp’s abilities while also providing its clients full advantages in the changing environment. Further, Procomp’s clients will get the benefit of more resources, financial services, and products while receiving services as before.
Earlier in September, Wells Fargo also announced its plan to acquire LaCrosse Global Fund Services from Cargill Inc. LaCrosse is an independent hedge-fund administration and middle-office service provider company of Cargill. The deal is subject to certain regulatory approval in several jurisdictions.
The transaction is being financed by the Structured Product Services division of Wells Fargo Corporate Trust Services (CTS), leader in providing trustee and agency services to institutional and corporate clients. The terms of the deal were not disclosed.
The completion of the acquisition will facilitate Wells Fargo in expandinghedge-fund administration business. With the expansion, Wells Fargo and CTS will be able to take advantage of LaCrosse’s strong platform in the hedge fund administration market.
Further, they will get the benefit of traditional fund administration services, derivatives processing, operational support, bank-debt processing, and cash and collateral management services provided by LaCrosse at current level.
This amalgamation gives Wells Fargo full opportunity to leverage its strong corporate trust market reputation with LaCrosse’s experience and proficiency, which in turn, would offer clients enhanced hedge fund administration services.
In July, Wells Fargo also completed the acquisition of its strategic partner, Castle Pines Capital. The buyout was part of Wells Fargo’s effort to expand its business and add channel financing capabilities.
In May, Wells Fargo announced that it would acquire substantially all of the US-based operating assets of Foreign Currency Exchange Corporation, a wholly owned subsidiary of the Bank of Ireland Group (IRE), in an effort to expand its international banking capabilities. The deal would substantially strengthen Wells Fargo’s foreign currency exchange capabilities for domestic correspondent banks.
Strategic acquisitions have been part of Wells Fargo’s endeavor to strengthen its business model, expand its capabilities and diversify its footprint. Its growth plans have historically included several acquisitions, Wachovia being the largest addition in December 2008.
The company has demonstrated its ability to assimilate local franchises, offering a wider range of products compared with the acquired company, thus increasing the number of options for its customers. This has been the driving force behind its growth in the recent years.
With cross-selling as its key strength, Wells Fargo has a diverse geographic and business mix that enables it to sustain consistent earnings growth. Opportunistic acquisition and the demise of some smaller players helped the company to garner a larger share in the market. Yet, top-line headwinds and regulatory issues remain a cause of concern.
Wells Fargo currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Moreover, considering the fundamentals, we are maintaining our long-term Neutral recommendation on the stock.
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