The 401(k) business keeps getting bigger, and yet it keeps getting smaller at the same time.

Transamerica Pyramid Center San Francisco, CA

Assets in defined contribution retirement plans continue to rise ($6.8 trillion as of June 30, of which $4.7 trillion is in 401(k)s, per ICI data). And yet the technology-driven, scale game of 401(k) recordkeeping means that for many recordkeepers consolidation is the name of the game. At the same time, the steady inflows of the business are attracting outside bidders, as building new recordkeepers is rare. Two huge deals just went down in 401(k) land, one of the consolidation flavor and the other with a more financial taste.

On Friday Marsh subsidiary (and former Putnam ally) Mercer unveiled what it's calling a "strategic alliance" with Aegon subsidiary Transamerica.

Three days later, private equity firms Aquiline Partners and Genstar Capital unveiled a deal to Ascensus from another PE shop, J.C. Flowers & Co..

Aquiline, Genstar, and Aegon did not want to let anyone how much they paid for their recordkeeper prizes, and both deals are slated to close next quarter.

Both RKers are open-architecture and don't offer their own mutual funds or other investment options, but other than that they're very different shops.

New York City-based Mercer's U.S. defined contribution administration business is focused on medium and large plans. In total, Mercer has 148 DC administration clients, more than 917,000 participants, and more than $71 billion in plan assets. That means its average DC client has nearly 6,200 participants and nearly $480 million in assets. And for Transamerica, a recordkeeper that already plays across nearly every market, the deal pushes it to about 5 million participants, $216 billion in assets, and solidly in the top ten in the business.

Meanwhile, Ascensus focuses more on the smaller end of the 401(k) business. It serves more than 40,000 retirement plans and more than 1.7 million participants; it's average plan has about 43 participants. (Ascensus is also a big 529 college savings plan, IRA, and HSA provider.) And the deal moves it from one PE backer to two new ones, without reducing the number of national recordkeepers out there or increasing Ascensus' size. It may also give Ascensus more dry powder for making its own acquisitions.

Here's some coverage of the deals so far.

Transamerica-Mercer:

"Transamerica to acquire Mercer's U.S. DC book of business," BenefitsPro;

"Mercer exits DC recordkeeping business," Employee Benefit News;

"Transamerica's Mercer Buy Makes Fifth-Largest DC Provider," Ignites;

"Transamerica to buy Mercer's defined-contribution record-keeping business," InvestmentNews;

"Transamerica to acquire Mercer's DC record-keeping business," Pensions & Investments; and

"Transamerica to Take on Mercer DC Recordkeeping Business," PlanSponsor.

Ascensus

"PE Pair Picks Up Fast-Growing Ascensus," Ignites;

"Genstar, Aquiline to acquire Ascensus," Pensions & Investments;

"Private Equity Firms to Acquire Ascensus Inc.," PlanSponsor; and

"Genstar, Aquiline Save Up for College and Retirement," the Wall Street Journal. 

Edited by: Neil Anderson, Managing Editor


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