Insurance and reinsurance broking giant Aon is reported to be considering a bid to acquire rival Willis Towers Watson, a deal that would position Aon as the largest it is said. Update, March 6th: Aon said the combination is now not being considered.
Aon is already a significant player in reinsurance and insurance-linked securities (ILS), but the addition of Willis Towers Watson, with its Willis Re reinsurance broking division and capital markets expertise would expand the firms reach significantly.
Bloomberg has reported that its sources say Aon is preparing a bid for WTW in the next weeks.
Preliminary talks between the pair are said to have been held already, but no final decision on any deal has been made.
WTW shares soared on the news today, up as much as 8.3% to value the firm at a high of almost $24 billion.
Aon is valued at around $40 billion and its shares had not moved as much, being down around 3% currently.
Currently Marsh & McLennan, which recently acquired JLT, is the largest brokerage by revenue, Bloomberg said, but acquiring WTW could propel Aon (second largest) into first place there (WTW is currently third).
Analysts noted that any deal may not be welcomed by employees of WTW, which has undergone considerable structural change since the bringing together of Willis Group with Towers Watson.
KBW also said that such a deal could bring about, “significant revenue dis-synergies in both (re)insurance brokerage and consulting.”
Whether further consolidation in broking is a good thing is a topic of much discussion, given the importance of having choice in this marketplace.
But with pressure on margins and brokers being forced to demonstrate the value they can add to the risk transfer market value chain, growing is also inevitable as they seek to add increasing layers of service revenue to their business models.
Of course, both Aon and WTW have much more to them than pure broking, being risk and capital advisors with investment, benefits and pensions arms as well.
Such a deal could raise antitrust questions as well, so would not be guaranteed to go through easily.