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Aon confirms potential bid for Willis Towers Watson

Aon Center in Chicago

Aon PLC confirmed Tuesday that it is considering a bid for rival Willis Towers Watson PLC in a deal that potentially would create a brokerage behemoth with more than $19 billion in annual revenue.

In a statement, Aon said: “The company confirms that it is in the early stages of considering an all-share business combination with Willis Towers Watson. The company emphasizes that, at this point, its evaluation of a potential transaction is at a preliminary stage and there can be no certainty that any transaction will take place nor as to the form or terms on which any transaction might be pursued.”

The announcement followed a Bloomberg report earlier on Tuesday citing unidentified sources that said Aon is preparing to submit a bid for its rival “in the coming weeks” and the firm’s “have held preliminary talks.” 

If it goes ahead, a merger of Aon, the world's second largest brokerage, with Willis Towers Watson, the No. 3 broker, would create the largest insurance brokerage in the world, eclipsing rival Marsh & McLennan Cos. Inc., which is in the process of buying Jardine Lloyd Thompson Group PLC, another Top 10 brokerage.

The main benefit of the merger would be the addition of scale and efficiency to Aon, analysts said.

Aon reported $10.8 billion in revenue in 2018, and Willis Towers Watson reported $8.5 billion. Aon has about 50,000 employees in about 120 countries and territories, and Willis Towers Watson has about 43,000 employees in about 140 countries and territories, according to the brokerages’ most recent regulatory filings.

“Aon has proven to be very good at acquisitions and margin expansion, so this would provide another opportunity to improve efficiency and, notwithstanding some inevitable revenue leakage, I think you’d see this combined company be an even bigger force with which to be reckoned in the marketplace,” said Meyer Shields, managing director at Keefe Bruyette & Woods Inc. in Baltimore.

Some clients of the brokers may move their accounts for diversification reasons, and some producers will likely leave if a deal goes ahead, which could benefit brokers below the largest three, he said.

The potential deal would further narrow the choices for clients seeking the capabilities of large brokerages, Mr. Shields said.

“Right now, there’s a world with two-and-a-half legitimate global brokers — two-and-three-quarters, maybe — and now we are going down to two,” he said.

From Willis Towers Watson’s point of view, the price offered will likely be the most important factor to consider rather than a need to merge with a larger rival for strategic reasons, although Willis Towers Watson brokers would have access to more resources if the deal is completed, Mr. Meyer said.

But an independent Willis Towers Watson does have “a very clear path forward in terms of generating shareholder value,” he said.

A deal to buy Willis Towers Watson would add more scale and efficiency to Aon’s small and midsize commercial business, said Timothy J. Cunningham, managing director of Optis Partners LLC in Chicago.

“They’d get a lot of data with the deal, which they can use to enhance their position with clients and add scale and leverage to their middle-market and smaller business,” he said.

The deal would also add to Aon’s employee benefits business, Mr. Cunningham said, noting that although Aon has a long history of growing via acquisitions, the firm had focused largely on specialty acquisitions over the past several years.

Aon grew its domestic and international business significantly in 1990s and 2000s through a series of high-profile deals. Although the firm’s roots are in Chicago, where it still has substantial operations, it redomiciled to London in 2012, gaining significant tax benefits. Willis Towers Watson’s insurance brokerage operations grew out of the its origins in London, although it significantly expanded in the U.S. with its 1990 merger with Corroon & Black Corp.

Marsh & McLennan reported $15 billion in revenue in 2018 and JLT reported $1.45 billion, however, Marsh & McLennan said this week that JLT’s aerospace division would be sold to rival Arthur J. Gallagher & Co. to quell European regulators' concerns over the merger.

Mr. Shields said regulators may have some competition concerns about an Aon/Willis Towers Watson merger, given their concerns over Marsh/JLT.

Willis Towers Watson’s top executive said last month that the integration of operations that followed the then-record 2016 merger of brokerage Willis Group Holdings PLC and consultant Towers Watson & Co. was completed in the fourth quarter of 2018.

On a conference call with analysts discussing the firm’s fourth-quarter results, CEO John Haley said that with the integration of the firms complete, Willis Towers Watson would look to make more acquisitions.

Willis Towers Watson acknowledged the Aon announcement in a separate regulatory filing. A spokeswoman for Aon did not immediately return a call seeking comment. A Willis Towers Watson spokesman declined to comment.












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