CHICAGO—Aon Corp.'s acquisition of Hewitt Associates Inc. will catapult Aon to the top tier of providers of employee benefit consulting and outsourcing services to the nation's biggest employers.

In the biggest deal ever involving a benefit consultant, Aon last week said that it will purchase Hewitt in a cash-and-stock deal valued at $4.9 billion based on the July 9 close of Aon shares.

The deal eclipses last year's merger of Towers, Perrin, Forster & Crosby Inc. and Watson Wyatt Worldwide Inc., a $3.5 billion deal that was the previous record merger of benefit consultants.

Chicago-based Aon hopes to complete the acquisition by mid-November. At that point, it plans to integrate Hewitt and its Aon Consulting unit and change its name to Aon Hewitt. Aon Hewitt's chairman and CEO will be Russ Fradin, who now holds the same titles at Lincolnshire, Ill.-based Hewitt.

While Hewitt and Aon Consulting each generate just over $1 billion in consulting revenues, their market bases are strikingly different. Hewitt is a dominant player in the large-employer market. More than half of Fortune 500 companies are Hewitt clients, it says.

By contrast, Aon Consulting's business is concentrated among middle-market employers—organizations with fewer than 5,000 employees.

Other differences between Hewitt and Aon Consulting are just as dramatic. In the outsourcing field, Hewitt's $2 billion in revenues are about 10 times that of Aon Consulting revenues (see box, page 50).

Those differences had been noticed for a long time by Aon executives.

“While Aon is very strong in the middle market, acquiring Hewitt will significantly expand our ability to serve large employers,” Aon Consulting CEO Kathryn Hayley said.

In addition, a combined Aon Hewitt would bring more balance to Aon's book of business, Ms. Hayley said.

Based on fiscal 2009 figures, 49% of Aon Hewitt's revenues would be from consulting services, 40% from benefit outsourcing and 11% from human resources business process outsourcing. By contrast, about 85% of Aon Consulting revenues were derived from consulting in fiscal 2009.

While Hewitt was not seeking to be acquired and intended to remain independent (see story), the deal was compelling for several reasons, said Matt Levin, Hewitt's senior vp of corporate development and strategy.

For some time, Hewitt wanted to be a bigger player in the middle market, but just didn't have “enough feet” to win more business, Mr. Levin said. “This will help us exponentially in that market,” he said.

In addition, Aon has a greater global presence than Hewitt, said Mr. Levin, referring to Aon Consulting and its parent, Aon Corp.

At the same time, the deal is a win for Hewitt shareholders, as Aon will pay a 41% premium for their shares, and Hewitt employees, who will have more opportunities for advancement, he said.

Analysts and others say Hewitt's capabilities will strengthen Aon.

“It makes them a much stronger player,” said Meyer Shields, an analyst with Stifel, Nicolaus & Co. in Baltimore.

“The Hewitt acquisition will further bolster Aon's already strong global posture in the consulting area, broaden and complement its overall business risk and earnings profile, and create long-term operational synergies for the enterprise,” Neil Stein, director of financial institutions rating at Standard & Poor's Corp. in New York, wrote in a research update.

“This a huge win for Aon,” said Mike Hager, president of Hager Strategic Inc., a Washington- based outsourcing consultant. “Overnight, this gives them the ability to compete” with the largest benefit consultants, he said in referring to Mercer L.L.C. and Towers Watson & Co.

In addition, Aon's acquisition of Hewitt will add an organization that has been at the cutting edge in employee benefits design and administration, Mr. Hager said. “They anticipate where design is going,” he said.

Still, analysts say a major unknown is how quickly and successfully Aon Consulting and Hewitt can be integrated.

“There will be an integration challenge,” said Donn Bleau, national practice leader-human capital with executive recruiter Solomon Page Group L.L.C. in San Diego.

In fact, Mr. Bleau said one not-so-obvious beneficiary of the deal could be regional brokers looking to pick up more consulting talent to help clients cope with the requirements of the new health care reform law.

Even if the integration goes smoothly, some Aon and Hewitt consultants may decide to leave and some may be asked to leave if there is a duplication of services, Mr. Bleau said.

Aon said the transaction is expected to generate approximately $355 million in annual cost savings in 2013, primarily from reduction in back-office areas, public company costs, management overlap and leveraging its technology platform.

The transaction is certain to be scrutinized by antitrust regulators at the Justice Department. Still, the deal should pass muster because there still would be plenty of competition in the benefit consulting industry, with no barriers to prevent new firms from starting up, said Evan Stewart, a managing partner with the law firm Zuckerman Spaeder L.L.P. in New York.

Aon Corp.'s stock closed at $36.24 Friday, down $38.34 from the previous week.