Aon now says not targeting combination with Willis Towers Watson

Aon has now said that it is not pursuing a potential business combination with broking rival Willis Towers Watson, following up on yesterday’s news that a deal had been a consideration.

Aon said yesterday that it had looked into a possible business combination with Willis Towers Watson, a deal that would have made the merged entity the largest insurance and reinsurance broker.

The news initially broker as a rumour, but was later confirmed by Aon itself.

However, what it confirmed was that the combination had been considered, not that it was to be pursued.

Now, the company says that while it had been under consideration, it will not be followed up on.

Aon said today, “Consistent with Aon’s stated focus on return on invested capital the firm regularly evaluates a variety of potential opportunities within and adjacent to its industry.

“Aon had considered such a possibility with regard to Willis Towers Watson. News of that consideration subsequently became public and Aon 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.”

Whether this means a deal is really off the table right now between the pair, or just that a “business combination” between the two insurance and reinsurance broking giants is, remains to be seen.

There are few transformational M&A deals possible in insurance and reinsurance broking for a company the size of Aon. In fact it’s hard to think of any other deal that could meaningfully propel the broker to number one.

However, the dis-synergies could be enormous and the challenges of bringing together the two cultures also huge, making it a really difficult deal to get employee buy-in on, not to mention shareholders.

EPS accretion of such a deal is seen as possible by analysts, but it would be minimal considering the scale most say.

It will have been a confusing 24 hours for employees of the insurance and reinsurance broking pair and analysts now expect share price changes seen yesterday (WTW up, Aon down) will reverse.

Whether the last 24 hours has been good for client confidence in the pair of brokers remains to be seen.