Are brokers heading for big changes?

THE BROKERAGE INDUSTRY may be in for a seismic shift. If Willis Group Holdings Ltd.'s so far unsuccessful bid to acquire Marsh & McLennan Cos. Inc. signals nothing else, it indicates the world's largest insurance brokerage may be in play.

What's startling is not just that Willis is a fraction of the size of MMC but that Marsh & McLennan is viewed as an acquisition target. Two years ago, few--if any--would have predicted that.

As we report on page 1, financing for the proposed acquisition of MMC would have been provided by Kohlberg Kravis Roberts & Co., the legendary buyout firm that purchased Willis in 1998. Whether or not KKR and Willis make another offer and succeed in buying MMC, it certainly is well within the realm of possibility that someone eventually will acquire all or pieces of the world's largest broker.

It doesn't take a Wall Street expert to see that MMC has not recovered financially from the punch landed by New York Attorney General Eliot Spitzer in October 2004. To use only one measure, MMC's stock took a dive and shares remain well below their pre-Spitzer level. Make no mistake, MMC has a lot to offer a buyer: a global footprint, many talented employees and operations that, taken individually, are among the leaders in their markets.

Consolidation for consolidation's sake is not going to benefit insurance buyers, however. The acquisitions that made Marsh & McLennan and Aon Corp. megabrokers made them very powerful. But it was abuse of that power that, properly so, drew Mr. Spitzer's attention. Clout that works for brokers' clients is what's needed, and we hope any buyer of MMC makes that its top goal.