Willis Towers Watson P.L.C., the joining of Willis Group Holdings P.L.C. and Towers Watson & Co., will result in a more formidable competitor among the world's largest insurance brokers in tapping benefits business and the middle market.

However, integrating their operations may pose some risks for the businesses that are to formally combine in early 2016, following votes by both companies' shareholders this month to approve the $18 billion deal.

The combined entity will have greater scale, more diversification and a private insurance exchange with a profile more akin to a Marsh & McLennan Cos. Inc. and Aon P.L.C., said James Auden, managing director of insurance at Fitch Ratings Inc. in Chicago.

“The combined business model is going to look a lot more like Aon and Marsh,” said Cliff Gallant, managing director at Nomura Securities International Inc. in San Francisco.

“This puts Willis into the conversation, into that peer group with the big guys,” he said. “I've been in favor of the deal. I think there's a lot of value.”

Despite some vocal shareholder opposition arguing that the price undervalued Towers Watson, increasing a one-time cash dividend to $10 per share was enough to win shareholders' approval.

“It's been a little bit of a journey for them … but it looks like they're back on course,” Mr. Auden said.

“Willis will remain the third-largest broker, but will move a lot closer to the top two,” said Bruce Ballentine, vice president and senior credit officer at Moody's Investors Service Inc. in New York.

“The deal enhances the overall product and service offerings from Willis, thus making the business model more robust,” Eamonn Flanagan, head of the Liverpool, England, office of Shore Capital Group Ltd., said in an email.

Merger of equals

The deal, described as a merger of equals, is a reverse stock split in which 2.6490 Willis shares are to be converted to one share, allowing Towers Watson shareholders to receive one post-split Willis share for each Towers Watson share.

The combined entities had pro forma 2014 revenue of $7.30 billion and net income of $398.0 million, according to a filing with the U.S. Securities and Exchange Commission.

While that still would trail Marsh and Aon, which each had more than $12 billion in 2014 revenue according to the latest Business Insurance ranking, it would give Willis Towers Watson a greater cushion from the world's No. 4 broker, Arthur J. Gallagher & Co., which had more than $3.5 billion in 2014 brokerage revenue.

“I think this strongly enhances Willis' position with the large clients and firms up a lot of their relationships,” Mr. Gallant said. “They've got relationships now throughout the Fortune 1000 class of businesses.”

“Post-merger, Willis will have a strong presence in employee benefits,” said Mr. Ballentine. “Marsh and Aon are pretty well-balanced between property/casualty and employee benefits services, and now Willis will be as well.”

“Willis has had a hard time competing against Marsh and Aon in the Fortune 100 class of business, and that's where Towers is particularly strong, so hopefully that will increase Willis' rate in getting into that marketplace,” said Mr. Gallant. “For Towers, they're trying to get into the middle market with their exchanges, and that's where Willis is strong.”

Towers Watson has OneExchange, a private health insurance exchange serving 1,100 employers and 800,000 customers, according to its website.

The combined entity also will benefit from stronger credit metrics.

“We called the merger credit positive and changed the (Willis) rating outlook to stable from negative,” said Mr. Ballentine. “Size and diversification are positive from a credit perspective.”

“The business profile gets a big boost, and the financial metrics improve through this transaction,” he said.

Despite the potential upsides, the deal faces “considerable” integration challenges, Mr. Flanagan said.

“These are people businesses, and there will be immense pressures on both sets of employees both in terms of possible consolidation implications (i.e. losing their jobs) and being targeted by other firms,” he said.