Principal® to acquire ESOP business from Ascensus
Principal Financial Group announced a definitive agreement to acquire Ascensus' employee stock ownership plan (ESOP) business. This acquisition will bring around 800 plans and over 165,000 participants to Principal's workplace savings and retirement solutions, solidifying its position as the top ESOP service provider in the U.S. The transaction, set to close by the end of Q2 2024, includes Ascensus' ESOP recordkeeping business, ESOP Economics consulting group, and Telescope™ software. Clients and employees will transition to Principal, benefiting from enhanced digital access, support tools, and audit process improvements. The acquisition aims to strengthen Principal's systems and capabilities, providing greater value and enhanced services to ESOP clients. The increased interest in ESOPs aligns with broader market trends, as the number of newly created ESOPs rose 39% from 2020 to 2021. Financial terms were not disclosed.
- Principal to acquire 800 ESOP plans and 165,000 participants from Ascensus, enhancing its market position.
- Acquisition includes advanced ESOP Economics consulting group and Telescope™ software, improving service offerings.
- Transaction expected to close by the end of Q2 2024.
- Clients will benefit from enhanced digital access, support tools, and improved audit processes.
- Strengthens Principal's capabilities and expertise in the retirement solutions market.
- Terms of the transaction were not disclosed, creating uncertainty about the financial impact.
- Integration risks as all products, clients, and employees transition to Principal.
Insights
Principal Financial Group's acquisition of Ascensus' ESOP business is a noteworthy event in the retirement solutions market. Firstly, this move will significantly enhance Principal's market position in the employee stock ownership plan (ESOP) space, adding approximately 800 plans and more than 165,000 participants. This increase in scale is important as it helps Principal solidify its top spot in the ESOP service provider rankings in the United States.
From a financial perspective, while the terms of the transaction are not disclosed, the strategic acquisition is expected to yield economies of scale. These can lead to cost savings, improved operating margins and enhanced service offerings for existing and new clients. Revenue growth is also anticipated as Principal integrates the additional plans and participants into its platform, leveraging their established client relationships to cross-sell more products and services.
For retail investors, the outcome of this acquisition can be seen in both the short and long term. In the short term, there might be acquisition and integration costs that could impact quarterly earnings. However, in the long term, the bolstered ESOP business should contribute positively to Principal’s overall revenue and profitability, enhancing shareholder value.
This move is aligned with industry trends where there's a growing interest in ESOPs, which have seen a 39% increase in creation from 2020 to 2021. As businesses look to adopt more competitive talent recruitment and retention strategies, Principal is well-positioned to capture a larger market share.
The acquisition of Ascensus' ESOP business by Principal Financial Group signifies a strategic expansion into a rapidly growing market. The enhanced capabilities, including the ESOP Economics consulting group and Telescope™ software, will likely improve Principal's service offerings, making them more attractive to both new and existing clients.
The addition of digital access, support and account management tools, along with improved audit processes, is particularly beneficial in today’s digital-focused market. These enhancements can drive better customer satisfaction and retention, an essential factor considering the competitive landscape of financial services.
Moreover, the influx of talent from Ascensus will bring in specialized expertise, which can foster innovation and further elevate Principal's market standing. This integration of talent and technology should not be overlooked as it positions Principal to better compete with other key players in the ESOP and broader retirement savings markets.
From a market perspective, this acquisition could result in a more diversified service portfolio for Principal, enabling them to tap into various segments of the retirement solutions market more effectively. This strategic move is likely to strengthen their brand and market perception as a leader in comprehensive retirement solutions.
“Growth is an integral part of our retirement strategy at Principal, and we’re excited to add scale and deepen our expertise with the addition of experienced talent and solutions from Ascensus,” said Teresa Hassara, senior vice president of workplace savings and retirement solutions at Principal. “This acquisition strengthens the systems and capabilities that have made Principal a leader in retirement.”
Through this acquisition, Principal will gain full ownership of the ESOP recordkeeping business from Ascensus, along with its ESOP Economics consulting group and Telescope™ software. All products, clients, and employees will transition to Principal at the time of close, which is anticipated around the end of the second quarter of 2024. As Ascensus ESOP clients and participants are transitioned, they will be exposed to enhancements on the Principal recordkeeping platform such as digital access, support, and account management tools as well as audit process improvements to reduce time.
“After getting the opportunity to review Ascensus’ ESOP business more intimately, we found it to be very complementary to the expertise Principal has as a total retirement solutions provider,” said Andrew Matos, head of stock plan services for Retirement and Income Solutions at Principal. “The acquisition positions us to offer greater value, enhanced services, and stronger products to our ESOP clients, and the integration of strong talent from Ascensus will be essential to support the growth of our ESOP business.”
Commenting on the agreement, Ascensus president Nick Good said, “We have great respect for Principal, their expertise, and their commitment to serving their clients with excellence. We’re confident that the valued client relationships and associates transitioning through this transaction will benefit greatly from the leadership, capabilities, and continued investment Principal has in the ESOP marketplace.”
Interest in ESOPs has grown in recent years as owners look to transition their businesses or become more competitive with talent recruitment and retention. In total, there are approximately 6,500 ESOPs in the
Perella Weinberg Partners served as financial advisor to Principal, with Skadden, Arps, Slate, Meagher & Flom LLP acting as legal counsel. Terms of the transaction are not being disclosed.
About Principal Financial Group®
Principal Financial Group® (Nasdaq: PFG) is a global financial company with nearly 20,000 employees3 passionate about improving the wealth and well-being of people and businesses. In business for more than 140 years, we’re helping approximately 62 million customers4 plan, protect, invest, and retire, while working to support the communities where we do business, and build a diverse, inclusive workforce. Principal® is proud to be recognized as one of the 2024 World’s Most Ethical Companies® by Ethisphere5, a member of the Bloomberg Gender Equality Index, and a “Best Place to Work in Money Management6.” Learn more about Principal and our commitment to building a better future at principal.com.
About Ascensus
Ascensus is a market-leading enabler of tax-advantaged savings—providing technology, services, and expertise that help millions of people save for a better future.
The company is a premier savings program service provider, third-party administrator, and government savings facilitator. Its platforms, industry knowledge, and data-based insights enhance the growth and success of its partners, their clients, and savers through co-branded, private-labeled, and governmental partnerships.
Ascensus offers comprehensive qualified and nonqualified retirement plan solutions, third-party retirement plan administration, 529 education and ABLE savings program administration, corporate- and bank-owned life insurance solutions, and fiduciary and total rewards services.
The company's brands include Ascensus; Newport, an Ascensus company; and FuturePlan by Ascensus. Ascensus has more than
For more information, visit ascensus.com and newportgroup.com.
Insurance products issued by Principal National Life Insurance Co (except in NY) and Principal Life Insurance Company®. Plan administrative services offered by Principal Life. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities, Inc., member SIPC and/or independent broker/-dealers. Principal Global Investors leads global asset management. Referenced companies are members of the Principal Financial Group®,
© 2024 Principal Financial Services, Inc. Principal®, Principal Financial Group®, and Principal and the logomark design are registered trademarks of Principal Financial Services, Inc., a Principal Financial Group company, in
1 Based upon number of plans, 2023 PlanSponsor Recordkeeping Survey, July 2023
2 National Center for Employee Ownership, Employee Ownership by the Numbers
3 As of March 31, 2024
4 As of March 31, 2024
5 Ethisphere, 2024
6 Pensions & Investments, 2023
View source version on businesswire.com: https://www.businesswire.com/news/home/20240516186376/en/
Phillip Nicolino, 515-362-0239, nicolino.phillip@principal.com
Source: Principal Financial Group
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