I am often asked about TPAs that merge or consolidate. After 20 years in this job, I've seen just about every format & outcom...and, unfortunately, too many well-intentioned TPA marriages are not as happy as hoped. So, let me offer these thoughts for consideration:
(1). In general, I have found that TPAs are like butterflies. If someone touches their wings, they can't fly anymore. The "touching the wings" is usually well-intentioned and even text-book-perfect business administration changes. However, the TPA business and relationship with clients is a very ethereal thing. So, any change risks spooking the clients...and without clients you have no business. I have seen large top-notch TPAs wither away within 5 years because of seemingly-logical merger changes.
(2). TPA is a business in which bigger (or at least the client perception of bigger) is often not better. The whole secret of success of TPAs is highly personalized service in which the client wants and expects his TPA to be able to respond on a moment's notice and/or custom-design something for them right away. Saying something is off-site or anything else that smacks of not being personalized and their contact person (you) totally in charge can be a real turn-off.
(3). Different kinds of clients have different cultures & expectations. So, what might have been winning ways with single-employer plans could be poison with Taft-Hartley clients and magnify the client jitters that the new owners are "outsiders".
(4). The name of the TPA entity can also be a factor. Think it through carefully for the same reasons of spooking the clients. A name change that is solely a rhetorical act is probably OK, but combined with any of the other kinds of management changes can become a constant nagging reminder of the changed circumstances.
(5). Another potential legal quagmire which can sometimes create unexpected adverse business impact on your partner organizations is the ERISA fiduciary prohibition against "self-dealing". Most TPAs look to DOL like an independent, and can show some arm's-length between the TPA firm and any services (such as PPOs, HMO, etc.) of a distantly affiliated entity. However, if a TPA looks merged in a cohesive corporate structure, then any services the TPA arranges for the client (such as PPO, stop-loss, etc.) from the same firm raises potential red flags for DOL investigation. ItÕs not that it is de facto illegal. It is a matter of appearances that puts you on the DOL fiduciary radar screen.
(6). Let me end with the most important factor in the success or failure of TPA mergers & buyouts: human personality & expectations. Folks, buying or selling a TPA firm is like getting married, especially if there is the normal 5 year carry-over with the old CEO. The two CEOs (and senior staff on each side) should get to understand each other and candidly talk through how each thinks and would react in various kinds of situations (such as the new owner wants the services or contracts changed significantly, but that would upset the old client...or the old owner wants to continue some of the old customs...or the new owner expects the TPA to collect interest on monies the old owner feels should be plan assets). Get to know each other as if youÕre getting married! A retreat or extended informal meeting is probably best....with ground rules of absolute candor.