Aon pulls plug from $30 billion Willis Towers Watson deal
An anti-trust lawsuit has scuppered the $30 billion mega-merger of two of the world’s largest insurance consultancies. Willis Towers Watson and Aon would have created the world’s largest broker through the deal, something which the US Department of Justice believes violated competition law.
In March 2020, Aon announced plans to buy rival Willis Towers Watson for an all-stock transaction. The news promised to draw to a conclusion a year-long saga, 12 months after leaked negotiations saw talks between the two companies collapse. One year later, however, the transaction has once again gone down in flames.
Recent years have seen a period of rapid consolidation at the top of the human capital services and insurance broking industry. In 2018, Willis Towers Watson itself out of a $8.9 billion mega merger between Towers Watson an Willis Group – while in 2019, Marsh & McLennan bought Jardine Lloyd Thompson for in another multi-billion deal. The proposed deal between Willis Tower Watson and Aon looks to have finally caught the eye of competition watchdogs, however, and in June it emerged the US Department of Justice (DoJ) had moved to block the deal.
The DoJ’s antitrust division called for a legal halt to the merger, as it asserted that if Willis Towers Watson were to become part of Aon, the insurance consulting industry would see its current Big Three of Aon, Willis Towers Watson and Marsh & McLennan become “the Big Two.” This, the regulator argued, was something which would be bad for market competition, as the sector’s customers – companies, pension funds and retirees who rely on insurance brokers – would have less choice regarding services and pricing.
A month after the DoJ launched its lawsuit, the delays have seen Aon and Willis Towers Watson call off their $30 billion merger altogether, claiming the US regulators' objections as having created unacceptable delay and uncertainty. The news sees Aon pay Willis a $1 billion termination fee, while Willis Towers Watson said this would allow it to boost share repurchases by $1 billion.
Aon Chief Executive Greg Case commented, "Despite regulatory momentum around the world... we reached an impasse with the U.S. Department of Justice." He also suggested the DoJ had taken a position that “overlooks that our complementary businesses operate across broad, competitive areas of the economy.”
The regulatory momentum Case referred to includes the news Aon and Willis Towers had agreed to sell an assortment of different assets to smaller rivals to appease Europe’s antitrust regulator and the Justice Department, by creating new and larger competitors. While the European Commission signed off on that front, the DOJ argued they did not go far enough.
US Attorney General Merrick Garland subsequently called the deal’s termination "a victory for competition and for American businesses, and ultimately, for their customers, employees and retirees across the country " because employers "rely on insurance brokers like Aon and Willis Towers Watson for managing the complexities of these health and retirement benefits.”
