F&C Asset management terminates Mellon outsourcing deal
01 November 2005 | 12688 views | 0
F&C Asset Management has discontinued its project to outsource the former Isis Asset Management operational functions to Mellon Financial Services, after "failing to agree contractual terms".
The move to terminate the outsourcing deal follows months of due diligence and contractual negotiations between F&C and Mellon, after the two firms first signed heads of agreement in November last year.
Under the terms, up to 50 former Isis staff based in Edinburgh and London were to transfer to Mellon, which already handled F&C's pre-merger business.
Alain Grisay, chief executive officer designate of F&C, says: "We were only ever prepared to proceed with this outsourcing project on the basis that we would be completely satisfied that the terms would be firmly in the interests of all of our stakeholders: staff, clients and shareholders. We were unable to reach such a position. We are now undertaking an orderly professional disengagement from this project."
He says the firm has already moved to centralise operational staff, and boot up a new IT platform for client administration. Looking ahead, he says, the business will now look to invest in a new data warehouse with a view to consolidating data from various outsource providers.
The discontinuation of the deal should shave £10 million off the estimated £60 million Isis integration costs says Grisay. "The estimated integration costs are once again £50 million, which includes the cost of building the data warehouse."
He adds: "The decision not to proceed will be beneficial to F&C's cash flow and there will be no impact on reported earnings as these costs would have been treated as exceptional items.
"This does not change the annual cost savings target we communicated in our interims which is £30 million by 30 June 2006 and £33 million by 2008."