In the wake of Aon PLC’s scuttled $30 billion attempted acquisition of Willis Towers Watson PLC and the associated deal to sell Willis Re to Arthur J. Gallagher & Co., it still would be a “long-term positive” for Gallagher to buy the reinsurance brokerage business, according to one analyst. 

A Gallagher purchase of Willis Re would help “stabilize Willis Re’s employee retention” and might fetch a higher multiple for the Willis business above the nine times earnings before interest, taxes, depreciation, and amortization of the original deal between the two, said Meyer Shields, Baltimore-based managing director at Keefe, Bruyette & Woods Inc., in a note Monday commenting on market reports. 

Thumbnail arithmetic in Mr. Shields’  note assumes a 13 times EBITDA multiple for a Willis Re deal, although Gallagher shares might subsequently trade lower on such terms. The deal would allow  Willis’ next CEO to focus on a smaller and more manageable company, the note said. Willis CEO John Haley was expected to retire at the conclusion of the planned Willis-Aon deal.

A Gallagher spokeswoman said in an email the company does not comment on “market speculation.” 

Aon-Willis agreed to sell much of Willis Re to Gallagher earlier this year to allay competition concerns from European regulators over the larger deal. The Willis Re sale was contingent on the Aon-Willis deal being completed and was terminated when Aon last week pulled out of the deal to buy Willis in the face or U.S. regulatory opposition.

Meanwhile, analysts said the increased U.S. antitrust scrutiny is not likely to bleed into future insurance deals. 

Timothy J. Cunningham, principal at Optis Partners LLC, a Chicago-based investment banking and financial consulting firm, said it was the magnitude of the deal that attracted regulators’ attention and there should be “no chilling effect” on the wider insurance mergers and acquisitions market. 

“Remember this was the No. 2 and No. 3 brokers in the U.S., with nearly $10 billion in combined U.S. revenue,” he said.  

There is a sharp drop-off in scale below the top strata of brokers, Mr. Cunningham said.

“The 14th largest broker on the Business Insurance (Top 100) list is $860 million and a combination of any of the No. 5 through No. 13 would still be smaller than No. 4 Gallagher (on a global basis),” Mr. Cunningham said.

J. Paul Newsome Jr., Chicago-based managing director of equity research at Piper Sandler & Co., said it remains to be seen what effect or effects the scrapped merger might have. “We don’t know because it just happened,” he said. “There may be a few more regulatory steps to get through with a large transaction.” 

The scale of the Aon-Willis deal made it unique and in the insurer sector there are no real analogues in terms of market concentration, Mr. Newsome said. “There are certainly companies as large as Aon or Willis,” but none have a “commanding share” of any line of business. 

The drop in broker scale below the top brokers would make it less likely that future potential combinations would rise to the level of scrutiny given the Aon-Willis deal, he said.

During Aon’s second-quarter earnings call with analysts July 30, CEO Greg Case cited both the extent of demands by the U.S. Department of Justice, which had sued to block the deal, and an extended timeline “well into 2022” as the rationale for scrapping the deal to “create certainty and clarity.” 

U.S. Attorney General Merrick B. Garland called the merger’s termination “a victory for competition and for American businesses, and ultimately, for their customers, employees and retirees.”