Aon – Willis Towers Watson merger review by Singapore to deepen

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The Competition and Consumer Commission of Singapore has said this morning that it intends to deepen its review of the merger of insurance and reinsurance broking and consultancy giants Aon and Willis Towers Watson (WTW).

aon-willis-towers-watsonWay back in April, the Competition and Consumer Commission of Singapore (CCCS) began a consultation on the proposed merging of Aon with rival Willis Towers Watson, asking for feedback on the merger and saying it is assessing whether it would infringe section 54 of its Competition Act.

Having now completed its initial review, the CCCS now says it wants to deepen this as it’s identified areas for further review, with a specific focus on benefits related areas of the businesses.

The CCCS said that Aon notified it over the supply of retirement benefits consulting services and human capital consulting services, two areas in which Aon and WTW overlap in Singapore.

Now, based on information provided by Aon and supported by additional third-party feedback on the proposed merger, the CCCS said it has identified that executive compensation and related consulting services, as a sub-segment under human capital consulting services, deserve further examination.

“Third party feedback suggested that the merged entity will become the largest provider of executive compensation and related consulting services in Singapore post-Proposed Transaction, and that there are limited alternative providers available who are able to compete effectively in Singapore,” the competition authority explained.

The feedback also highlighted limited personnel with the experience to deliver these services, suggesting they are already snapped up by the big providers, including Aon and WTW, suggesting barriers to other companies expanding and competing.

In addition, the ability to build up a database compensation data, necessary to provide the kind of consulting services the merger parties offer, is seen as another barrier to entry.

Because of all this feedback, the CCCS says it “needs to further review the competition effects of the Proposed Transaction in greater detail.”

So far no mention of insurance and reinsurance broking, despite the parties having significant offices in the region.

But given there hasn’t been any mention of this, it can be assumed the CCCS is not so concerned about barriers to entry in relation to this and likely appreciates the fact many global insurance and reinsurance brokers have offices in Singapore anyway, given its position as a regional hub for insurance, reinsurance and risk transfer.

So instead, this niche of consulting on benefits and compensation appears the focus for this regulator. Which perhaps presents a much easier carve out for Aon, if divestitures were to become necessary.

The CCCS said that at this stage of its now expanded review of the proposed merger, the parties can come forwards with offers to address the potential competition concerns.

That means it is inviting ideas on potential remedies to the situation, likely divestitures.

If no offers to address competition concerns are made, the review could proceed to a “detailed further review”.

A Phase 2 review would entail a much deeper look at the merger and it’s likely Aon would want to avoid this, in order to expedite any decision here and prevent another location holding up progress elsewhere in the world.

Also read:

Aon & WTW “surprised” by DoJ lawsuit. Gallagher ready to snap up divestitures.

Divestitures more likely than Aon abandoning Willis deal: Analysts.

US DOJ sues, says Aon Willis would be “broking behemoth”, parties disagree.

Aon selling $1.4bn of US retirement units to address US DOJ merger questions.

US DOJ may not challenge Aon / Willis Towers Watson merger: Report.

Aon / WTW: Willis Re sale supported, as industry wants broker choice.

Aon sells German pensions business to LCP, as further step towards WTW merger.

Aon & WTW agree $3.57bn sale of assets to Gallagher, including Willis Re.

Gallagher likely buyer of $3bn Aon – Willis (WTW) divestments: Report.

Aon expected to get conditional WTW acquisition approval from EC: Reuters.

EC asks for feedback on sale of Aon / WTW assets, as MMC gains talent.

Aon in proactive offer to US DOJ on Willis Towers Watson merger: Report.

Aon – Willis Towers Watson divestiture reports expand to US & Bermuda.

EC extends Aon – Willis Towers Watson merger deadline again.

Aon – Willis Towers Watson merger deadline pushed back by EC.

Aon – Willis Towers Watson merger assessed by Singapore competition authority.

Aon & Willis Towers Watson merger may face EC statement of objection: Reuters.

Aon & Willis Towers Watson merger to “significantly lessen competition”.

Aon & WTW cite alt. capital, disintermediation & marketplaces in defence of merger.

Aon & Willis Towers Watson reveal leadership of combined company.

Willis Re divestment seen necessary for Aon – WTW merger to complete.

If Aon / WTW leads to divestitures, AJG seen as “best fit” for Willis Re: KBW.

EC investigates Aon / WTW deal, cites competition “concerns”.

Aon + WTW to “extend proven model of catastrophe bonds” – CEO’s Case & Haley.

Aon & Willis Towers Watson to merge.

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