Watson Wyatt Climbs in First Trading Day

Shares of Watson Wyatt (WW:NYSE) rose as much as 19% in their trading debut Wednesday, making the company one of the few human resources consultants to go public.

The issue of 5.6 million shares, priced in the middle of its range at $12.50 a share, raised $70 million. Deutsche Banc Alex. Brown was the lead underwriter, while Banc of America Securities and Robert W. Baird & Co. were co-underwriters.

"We wanted to have a more modern compensation program, the offering of stock options, for the attraction and retention of employees, and we wanted currency for potential acquisitions," said John Haley, president and chief executive.

In addition, the Bethesda, Md.-based company will use the proceeds for capital expenditures and working capital.

Haley had no details on acquisition targets: "We have only thought about how to approach vetting acquisitions, not about specific companies." He did explain, however, that any acquisitions would help to maintain the company's global reach in the benefits, human capital and technology areas. (Human capital deals with rewards and motivation programs for employees, while technology deals with Web technology for communicating benefits and human capital programs to employees.)

In the past two to three years, Watson Wyatt has sold various businesses -- including benefit outsourcing, risk management consulting and defined contribution plan record keeping -- in an attempt to streamline its focus.

"Our target market is large corporations, either Fortune 1000 or similar companies around the world," Haley said. "We find that they buy best of breed and don't look for one-stop shops." In other words, big companies are willing to hire various consultants for the services they are best at, instead of hiring one consultant that can provide all the necessary services.

Many of Watson Wyatt's competitors are privately held, while Buck Consultants is owned by Pittsburgh's Mellon Financial (MEL) and William M. Mercer is owned by Marsh & McLennan (MMC). Before Watson Wyatt filed for an IPO, there was some speculation that the company might put itself up for sale. Haley says that was never a possibility: "When those deals occurred, we thought, 'Is this something that makes sense?' We decided that we did want to stay an independent company."

Aside from North America, Watson Wyatt has offices in Latin America and Asia, as well as operations in Africa, the Caribbean and Europe via ownership stakes in Watson Wyatt Partners and Watson Wyatt (Holdings) Europe.

In midday Wednesday trading, shares of Watson Wyatt were up 2.38, or 19%, to $14.88 each.

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