On why Aon-Willis Towers Watson’s deal was predictable

One industry professional with a reinsurance background is really not surprised by the announcement yesterday by Aon plc that it intends to acquire Willis Towers Watson for $30 billion in stock.

“I think the writing has been on the wall for some time – even prior to the rumoured acquisition of Willis by Aon of about a year ago,” Glenn McGillivray, managing director of the Institute for Catastrophic Loss Reduction (ICLR), told Canadian Underwriter Monday when asked for his reaction to the announcement. “I felt that it was only a matter of time before Willis was acquired (where there is smoke, there is usually fire),” McGillivray wrote in an email. “With Marsh & McLennan acquiring JLT almost a year ago, this gave impetus to this deal.”

McGillivray was referring to Marsh & McLennan’s acquisition of London, UK-based Jardine Lloyd Thompson Group plc, a deal valued at US$5.6 billion that closed Apr. 1, 2019.

McGillivray, who joined Swiss Re in 1994 and ICLR in 2005, was also asked what this means for the reinsurance market, given that both Aon and Willis Towers Watson offer reinsurance.

“While Willis (on the reinsurance side) is a major player in some markets in the world, they are fairly new to the Canadian market, which has been dominated by Guy Carpenter (Marsh & McLennan) and Aon for some years now,” McGillivray said. “Reinsurance brokerages can very much be about longstanding personal relationships, so it would be fairly difficult for what essentially was a start-up opening shop in Canada, even if it is staffed with people familiar in the industry,” he added.

The impact for reinsurance brokers will be minimal, as Guy Carpenter and Aon have been the dominant intermediaries in Canada for many years, McGillivray suggested. “There may, however, be impacts on the personal side as Aon absorbs folks from the Canadian operation and some may have history with Aon.

Related: Aon plc to buy Willis Towers Watson

“Assuming this deal closes, this will be about it for large reinsurance brokerage targets – there is really no one left to buy,” McGillivray said, save perhaps BMS Group, which doesn’t operate on the reinsurance side in Canada. As well, the focus of acquisitions after this deal may centre more on the data/analytics side.

Subject to regulatory and shareholder approvals and other customary closing conditions, the definitive agreement will create a combined equity company value of approximately $80 billion, Aon said in a statement Monday. The transaction is expected to close during the first half of 2021, at which time the combined firm will go to market under the Aon brand.

Aon would maintain operating headquarters in London, U.K. Aon shareholders would own approximately 63% of Aon and Willis Towers Watson shareholders would own approximately 37%. The combined firm will be led by Aon CEO Greg Case and Aon chief financial officer Christa Davies, along with a complimentary leadership team. The board of directors would comprise proportional representation from Aon and Willis Towers Watson’s current directors. Willis Towers Watson CEO John Haley will take on the role of executive chairman.

How will this deal affect Aon operations in Canada? “For now, it’s too soon to know the implications for Canada,” an Aon spokesperson told Canadian Underwriter. Willis Towers Watson also said they are “not able to comment on that level of detail at this time.”