£4.3 billion MMC deal for JLT could create largest UK pensions consultancy
As UK insurance broker Jardine Lloyd Thompson (JLT) braces itself for life as part of US financial services giant Marsh & McLennan Companies (MMC), following the sealing of a £4.3 billion takeover, there are a number of uncertainties facing staff. Thousands of jobs could reportedly be on the line as the new ownership seeks to absorb the cost of the acquisition, but the move could also create the UK’s largest pension consultancy if it results in a merger of Mercer and the employee benefits wing of JLT.
UK’s ten largest actuarial and pension consulting firms brought in a combined revenue of almost £2 billion last year. Despite mounting pressure from regulators, Willis Towers Watson, Mercer and Aon Hewitt remained the UK’s largest nationwide actuarial and pension consultancies. Until now, the largest of these has been Willis Towers Watson, commanding a yearly revenue of £408 million. That could be about to change, however, as the market’s second-largest revenue firm, Mercer, could be on the brink of a merger that will see them top that figure by some distance.
Marsh & McLennan Companies sealed a £4.3 billion takeover of UK insurance broker Jardine Lloyd Thompson in mid-September 2018. The move has the backing of the JLT board, will net senior management pay-outs of £100 million in the process, though at the other end of the deal, MMC is expected to cut 2%-5% of the combined group's 75,000 workforce (MMC has around 65,000 staff while JLT has 10,000), meaning as many as 3,750 jobs could be lost thanks to the acquisition. The company, which holds market capital of £31 billion and owns consultancy giant Mercer, said the redundancies would come from a "broad range" of units including finance, HR, IT services, legal and administrative support.
At the same time, Mercer could stand to be a major beneficiary of the move. MMC said it would retain JLT's existing commitments to its defined benefit schemes, including planned deficit recovery contributions and contractually-required contributions. Should the deal result in a merger of the Mercer and JLT Employee Benefits, the combined entity will become the largest UK consulting business by turnover. According to accounts for the year end 31st December 2017, Mercer’s UK business boasted revenues of £384.3 million. JLT Benefit Solutions had a turnover of £121.3 million in the year to 31 December 2017, meaning a combined entity would have a turnover of £505.6 million, and sit comfortably atop the UK pension consulting market.
JLT Group Chief Executive Dominic Burke will join MMC as Vice-Chairman and serve as a member of its executive committee. He said of the news, "I am enormously proud of what JLT has achieved, founded on our people, our culture and our unwavering commitment to our clients. MMC is, and always has been, one of our most respected competitors and I believe that, combined, we will create a group that will truly stand as a beacon for our industry."
MMC President and Chief Executive Officer Dan Glaser said of the broader acquisition, "The complementary fit between our companies creates a platform to deliver exceptional service to clients and opportunities for our colleagues… On a personal level, I have come to know, and respect, Dominic Burke and his management team from my time both at MMC and as an underwriter.”
The deal comes as the Competition and Markets Authority (CMA) continues an investigation into the investment consulting market. The CMA has already ruled out an industry-wide overhaul of investment consulting in the UK, following a protracted process which has seen a number of Britain’s largest pension advisors sweating over the past 30 months, however. In its provisional decision, published in July, the watchdog said the market was not "highly concentrated."
