DealmakingWealthtech

Alight to pursue bold plans following merger with Foley’s SPAC

BPaaS rollout and revenue from government contract provides clear line of sight to financial trajectory

Blackstone-owned wealthtech player Alight Solutions — a benefits and recordkeeping company that’s going public through a $7.3 billion SPAC merger — is using a potentially multibillion-dollar deal with the federal Thrift Savings Plan as the launchpad for its next-generation “wealth cloud” service.

On January 25, Lincolnshire, Illinois-based Alight announced it is merging with Las Vegas-based Foley Trasimene Acquisition Corp., a publicly traded SPAC founded by high-profile investor Bill Foley. Once the merger is completed, Alight’s shares will trade on the New York Stock Exchange. In a news release, Foley said Alight “is poised to be the preeminent employee engagement partner.”

The Thrift Savings Plan deal, signed in November, will put 6.1 million federal employees and uninformed military personnel on Alight’s wealth platform. Under the deal, Alight will work with Accenture Federal Services to provide recordkeeping, administration and support for participants and beneficiaries in the Thrift Savings Plan. This plan offers tax-deferred retirement savings and investment benefits for federal employees that are similar to 401(k) benefits for private employees.

Alight estimates the total contract value of the Thrift Savings Plan agreement will be $2.3 billion, with revenue in 2023 alone projected at $100 million to $130 million.

According to the Thrift Savings Plan, the wealthtech functionality supplied by Alight and Accenture — such as a mobile app and electronic signature capabilities — will be available in 2022.

Today, the wealth side of Alight’s business represents 20% of revenue. Its wealth services include administration of defined contribution and defined benefit plans, management of accounts and operation of a self-directed brokerage tool. As a testament to its reach in the wealth market, Alight has $480 billion in defined contribution assets under administration, and its U.S. brokerage platform comprises accounts totaling $6.8 billion. Its competitors in the wealth space include Fidelity, Vanguard and Voya.

Aside from the wealth component, Alight runs platforms for HR, payroll and health care benefits. It’s consolidating all of its services into a cloud-based business process as a service (BPaaS) offering.

“At Alight, we know that an employee engagement platform can only be delivered by bringing deep domain knowledge and cloud-based technology products wrapped with a services capability. A traditional services model can’t transform the employee experience the way we know it has to, and a software solution alone can’t solve it either,” Alight CEO Stephan Scholl said during a January 25 analyst call about the SPAC merger.

Thanks in part to the BPaaS rollout, Alight expects revenue to jump to $3.24 billion in 2023, up from an estimated $2.76 billion in 2021.

Alight’s customers include about 70% of the Fortune 100 and more than half of the Fortune 500. Among its big-name clients are FedEx, Home Depot, Ford, PepsiCo, Target, Citigroup and Bank of America.

“Alight works best as a partner with large corporate HR departments, providing a mix of software and services to help them run their health, wealth and other benefit plans,” Foley explained on the analyst call.

Alight executives say they want the business to evolve into a one-stop benefits shop for “health, wealth and wellbeing.”

“There is no question that Alight sits in a unique position in the middle of the employer and employee landscape. You know, it’s a landscape that is evolving every day and is massively accelerated by the pandemic,” Scholl said.

While SPAC deals and Robinhood have claimed many of the wealthtech headlines in recent months, there is a lot of other innovation coming to market across the sector. Check out this article on automated cash management to explore how players like Wealthfront, Betterment and M1 Finance are growing market share.

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