Arthur J. Gallagher & Co. will pay significantly more for Willis Towers Watson PLC’s reinsurance brokerage business if the second iteration of the deal goes through as planned, but the acquisition will help drive Gallagher forward in numerous ways, its top executive said.

Adding Willis’ reinsurance treaty business will enhance Gallagher’s capabilities in other lines of business, in addition to vaulting Gallagher into the top tier of the reinsurance broking sector, J. Patrick Gallagher Jr., the company’s chairman, president and CEO, said in an interview Friday.

The announcement came after an earlier agreement by Gallagher to buy Willis’ reinsurance business and various other insurance broking businesses for about 10 times the businesses' pro forma earnings fell apart. The prior deal had been contingent on Aon PLC’s plan to buy Willis going through, but that was scuttled by regulatory objections. The Gallagher-Willis deal will also require approval from multiple regulators.

Although Gallagher will pay a higher multiple for the Willis business – about 11.9 times earnings on a pro forma basis – in the second agreement, it’s still a good deal, Mr. Gallagher said.

“This was a deal for us that was expensive; we are very happy, we think it’s fair,” Mr. Gallagher said.

Willis’ reinsurance business is self-contained, has a successful track record, good growth strategies and an excellent management team, he said.

“This is no fixer-upper and it’s not about synergy savings. This is a world-class opportunity and it’s a world-class team, and we see this as our opportunity to play as a major reinsurance broker,” Mr. Gallagher said.

Gallagher is currently fifth in Business Insurance’s reinsurance broker ranking, with $100 million in annual revenue, but its combination with Willis Re will make it the third largest broker with close to $1 billion in annual revenue.

In addition, having significantly more reinsurance capabilities will enhance Gallagher’s services to retail clients, he said.

For example, Risk Placement Services Inc., Gallagher’s managing general agency business, will be able to access more reinsurance resources, he said.

“There’s nothing an MGA needs more than their reinsurance relationship,” Mr. Gallagher said.

All the senior Willis Re leadership will join Gallagher, and James Kent, global CEO of Willis Re, will lead the combined Gallagher and Willis reinsurance operations, Mr. Gallagher said.

Gallagher expects to spend $250 million in integration costs, which will include retention payments to Willis Re staff. Rivals have recruited numerous brokers from across Willis’ operations since the Aon deal was announced in March 2020.

“There’s over 200 folks who we’ve sat down and said, ‘Here’s a retention package.’ We have always believed in using our equity in those packages and in our long-term incentives. … We’ve made sure that they know that they’ve got a great stake in our company if they stay with us,” Mr. Gallagher said.

And the purchase won’t interrupt Gallagher’s long-standing “tuck in” acquisition strategy where it buys multiple smaller brokers each year, he said.

“Our appetite has not diminished at all, and our capabilities to close are not diminished by this at all,” he said.