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Arthur J. Gallagher & Co. on Wednesday completed its acquisition of Willis Re with a $3.25 billion payment that could rise to $4 billion depending on future revenue.
The deal follows a turbulent seven-month period that saw Gallagher’s original offer to buy Willis Re in May fall apart and later be modified and revived after Aon PLC’s deal to buy Willis Towers Watson PLC was terminated in July in the face of regulatory opposition.
The acquisition of Willis Re creates a reinsurance brokerage approaching $1 billion in annualized revenue and makes Gallagher Re the world’s third-largest reinsurance brokerage.
The deal will also enhance Gallagher’s insurance brokerage operations, said J. Patrick Gallagher Jr., chairman, president and CEO of Gallagher.
Under the terms of the deal, Gallagher paid Willis $3.25 billion and agreed to potentially pay an additional $750 million in 2025 based on the revenue of the acquired operations in 2024. The deal comprises Willis Towers Watson’s treaty reinsurance business. Its facultative reinsurance business, which is part of its retail brokerage operations, was not included.
The combined company has more than 70 offices across 31 countries and about 2,400 staff, a Gallagher statement said.
Gallagher Re will be led by former Willis Re CEO James Kent as global reinsurance CEO. He will report to Tom Gallagher, Gallagher’s CEO of global property & casualty brokerage.
Tom Wakefield, a former Aon executive who was named CEO of Gallagher Re in June, will head Gallagher Re’s U.K. business and report to Mr. Kent and Simon Matson, CEO of Europe, the Middle East and Africa for Gallagher, Mr. Kent said.
No further leadership changes have been announced, he said.
“We will undertake an integration process now that the companies are together,” Mr. Kent said in an interview. “We will look to roll that out through Q1, and by the end of Q1 we’ll have a combined structure and management team in place.”
Prior to the Willis Re acquisition, Gallagher Re was the world’s fifth-largest reinsurance brokerage. While it remains smaller than rivals Aon and Guy Carpenter & Co. LLC, a unit of Marsh & McLennan Cos. Inc., the three largest reinsurance brokers dwarf other reinsurance intermediaries in the market.
“The reinsurance portion of Gallagher now will be incredibly additive to what we are doing as a retailer,” Mr. Gallagher said. “We have much better data and analytics for our clients, we’ll know what’s going on at the very base of the capital management structure, and we’ll be able to use that in the retail market.”
The deal is not intended to create cost savings through significant numbers of layoffs as operations are combined, he said.
“There is not one person in this deal who is being asked to leave because we have an overlap. This is not a synergy play, this is an investment play,” Mr. Gallagher said, noting that it is Gallagher’s biggest acquisition to date.
Gallagher has a long history of growing its retail operations through numerous small acquisitions. While there are far fewer reinsurance brokerages operating, there will be opportunities for further acquisitions in that sector, Mr. Gallagher said.
“I do see tuck-in acquisition opportunities, and we’re always interested in creative people joining the firm,” he said.