Aon’s merger with Willis Towers Watson to create $80bn giant

The acquisition, announced on Monday, will see Aon pay $30bn in an all-share deal, after a similar transaction failed last year due to market speculation.

The consultancy firm anticipates that the deal – which is expected to be completed in 2021 – will provide annual pre-tax synergies and other cost reductions of $800m by the third full year of amalgamation.

The combined company will be named Aon and will maintain operating headquarters in London.

A tie-up between Willis Towers Watson and Aon will mean the combined business will be a dominant player in the market and will lead to less choice for trustees looking for third-party support

Vassos Vassou, Dalriada Trustees

John Haley, currently chief executive at Willis Towers Watson, will take on the role of executive chairman, with a focus on growth and innovation strategy. The combined business will be led by Greg Case, Aon’s chief executive, and Christa Davies, Aon’s chief financial officer.

Mr Haley said: “The combination of Willis Towers Watson and Aon is a natural next step in our journey to better serve our clients in the areas of people, risk and capital.

“This transaction accelerates that journey by providing our combined teams the opportunity to drive innovation more quickly and deliver more value.”

For Mr Case, the tie-up “will create a more innovative platform capable of delivering better outcomes for all stakeholders, including clients, colleagues, partners and investors”.

“Our world-class expertise across risk, retirement and health will accelerate the creation of new solutions that more efficiently match capital with unmet client needs in high-growth areas like cyber, delegated investments, intellectual property, climate risk and health solutions,” Mr Case said.

Deal goes ahead one year after

On March 5 2019, Bloomberg reported that Aon was preparing a bid for rival Willis Towers Watson. The company confirmed on that day that it was evaluating a potential transaction, but this was at a preliminary stage.

A day later, Aon announced the transaction would not go ahead. At the time, the company stated that since the news became public, it was required to issue a statement because Willis Towers Watson is an Irish company and is subject to Irish regulatory requirements.

“As a result of media speculation, those regulations required Aon to make the disclosure at a very early stage in the consideration of a potential all-share business combination. Aon today confirms that it does not intend to pursue this business combination,” Aon stated at the time.

The transaction now announced will allow the newly merged company to have an “established focus on client value, and its combined management teams have considerable experience with the integration of large, complex transactions”, Aon said.

Less choice for trustees

In the meantime, experts have already raised doubts about the deal potentially jeopardising market competition.

Vassos Vassou, a professional trustee at Dalriada Trustees, said: “As a trustee, our key concerns when looking after our members are choice, quality of service and value for money.

“A tie-up between Willis Towers Watson and Aon will mean the combined business will be a dominant player in the market and will lead to less choice for trustees looking for third-party support.

“When it comes to quality of service and value for money, trustees will need to be alert to any impact on their scheme, especially smaller schemes, if the combined new business ends up focusing its efforts on large schemes.”

According to anonymised figures previously compiled by the Competition and Markets Authority in 2018, the deal could give Aon control of between 27 and 32 per cent of the investment consulting market by revenue, and a market share of between 21 and 32 per cent in fiduciary management.

The competition watchdog referenced the fact that no company has a market share of more than 20 per cent in its finding that the industries were not highly concentrated.

Richard Dowell, co-head of clients at Cardano, pointed out that "all mergers bring uncertainties, both internally and externally, and clients should seek reassurance on what it means for them and their portfolios". 

However, he does not expect the merger to affect trustees’ choice longer term.

"But schemes must ensure that they give enough focus to team stability and retention of key people when appointing new managers. In the near term, with schemes facing particularly challenging market conditions, trustees must have confidence that their manager is focused solely on navigating their way through the rout – rather than a major corporate restructuring.”