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Willis Towers Watson PLC has agreed to buy direct-to-consumer health care organization Tranzact for $1.2 billion, the brokerage said Sunday, in a deal reflecting its renewed focus on strategic mergers and acquisitions.
An additional earn-out of up to $200 million is payable in either cash or stock in 2021 if certain financial targets are met, Willis Towers Watson said in a statement.
The deal, which is expected to close in the third quarter of 2019, will see Tranzact operate as an integral part of Willis Towers Watson’s benefits, delivery and administration business.
“(We said) if we were to do a larger scale acquisition, it would be in an adjacent market, particularly an adjacent market able to transform existing value chains. This fits right into that strategy,” said John Haley, CEO of Willis Towers Watson, in a call with analysts Monday morning.
The transaction is the “right opportunity” for Willis Towers Watson and represents a significant growth opportunity, said Mr. Haley during the call.
“Since we’ve had good success in the employer sponsored space, we feel the direct to consumer Medicare space is a good adjacency given the demographics in Medicare are growing and will continue to grow for years to come,” he said.
“Already 3% of our operation is in the direct-to-consumer space. This gives us opportunity to get in there much faster in a bigger way than we could do on our own,” he added.
Fort Lee, New Jersey-based Tranzact has a staff of approximately 1,300, including 850 licensed agents, 200 technology professionals, and 65 digital marketers, said Gene Wickes, head of benefits delivery and administration at Willis Towers Watson, during the analysts’ call.
In addition to its New Jersey headquarters, Tranzact has eight locations, including five sales centers across the United States and a technology development center in Peru, he said.
Tranzact had about $260 million in revenue as of year-end 2018 and has been growing at “double-digit” rates in the last few years, Mr. Wickes said.
“We expect the Tranzact business to grow at a 25% to 30% rate for the next five years,” he said, adding that the Medicare market is expansive and underserved presenting “huge untapped” market potential.
Willis Towers Watson leadership declined to comment on potential synergies arising from the deal during the analysts call.
Tranzact, which was acquired by current majority owner Clayton, Dubilier & Rice fund in 2016, combines digital marketing, sales and data science expertise to connect individuals to U.S. insurers, the statement said.
Willis Towers Watson is the world’s third-largest insurance brokerage, according to Business Insurance’s latest ranking.
Willis Towers Watson PLC continued to evolve during 2018, with several key executive appointments in the long wake of the merger that created the brokerage/consultant.