Aon plc and Willis Towers Watson have announced today that the firms have agreed to terminate their business combination agreement and end litigation with the U.S. Department of Justice (DOJ). The proposed combination was first announced on March 9, 2020.
Back in June the US Dept of Justice called the Aon-WTW merger a “harmful consolidation.” You can read more on the DOJ website.
The move by the DOJ highlights a sentiment of opposition to large corporations, and capitalism in general, that plays well to a virtue-signalling, Democrat voter base. Whilst Biden and Harris are in power, expect more resistance to future mergers and takeovers, especially if the companies involved are domiciled in the EU, or UK, for corporate tax purposes.
“Despite regulatory momentum around the world, including the recent approval of our combination by the European Commission, we reached an impasse with the U.S. Department of Justice,” said Aon CEO Greg Case. “The DOJ position overlooks that our complementary businesses operate across broad, competitive areas of the economy. We are confident that the combination would have accelerated our shared ability to innovate on behalf of clients, but the inability to secure an expedited resolution of the litigation brought us to this point.”
Case added, “Over the last 16 months, our colleagues have turned potential challenges into opportunities to advance our Aon United strategy. We built on our track record of innovation, continued to deliver industry-leading performance and progress against our key financial metrics and move forward with the strongest colleague engagement and client feedback scores in over a decade. Our respect for Willis Towers Watson and the team members we’ve come to know through this process has only grown.”
“Our team’s resilience and commitment are a source of pride and confidence. They have continued to bring to life Willis Towers Watson’s compelling value proposition to better serve our clients in the areas of people, risk and capital,” said Willis Towers Watson CEO John Haley. “Going forward, our focus remains steadfast on our colleagues, our clients and our shareholders. We believe we are well-positioned to compete vigorously across our businesses around the world and will continue to introduce important innovations to the market. We appreciate and deeply respect all the Aon colleagues we got to know through this process.”
In connection with the termination of the business combination agreement, Aon will pay the $1 billion termination fee to Willis Towers Watson, Willis Towers Watson’s proposed scheme of arrangement has now lapsed, and both organizations will move forward independently. Both firms will provide further financial updates and outlooks on their respective Q2 2021 earnings calls, which take place on July 30 for Aon and August 3 for Willis Towers Watson.
UPDATED 28.07.21 – COULD GALLAGHER MAKE A MOVE?
Arthur J Gallagher could still seek a game-changing acquisition of all or parts of Willis Towers Watson including Willis Re after the deal with Aon fell through, according to Bloomberg Intelligence (BI).
Gallagher had a $3.6 billion pact to buy several Willis businesses which was contingent on the Aon deal but dislocation at Willis and uncertainty over the CEO could mean the insurance broker is open to working with Gallagher, says BI. According to BI, the initial deal between Willis and Gallagher was agreed to remedy European Commission concerns and would have added an estimated 9% to 11% to 2020 EPS
Matthew Palazola, Senior Industry Analyst at Bloomberg Intelligence, said: “The biggest risk in our view was a culture clash but Gallagher has successfully integrated large European businesses in the past.”
The BI report, Gallagher May Still Seek Transformative Deal says Gallagher could acquire Willis Re – described as the Crown Jewel of the previous agreement with an estimated $750 million of revenue.
If Willis Towers Watson remains independent, it is likely to want to retain Willis Re but if Gallagher acquires the business, it will become the third largest global reinsurance broker from its current fifth.
Willis Re was seen as a regulatory hurdle in the Aon purchase of Willis as it would have made the combined firm a large leader in the reinsurance brokerage market creating a duopoly with Marsh McLennan. This wouldn’t be a worry in a deal with Gallagher.