Aon announces bid to purchase Willis Towers Watson for nearly $30 billion

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Aon, a global professional services firm providing a broad range of risk, insurance, retirement, and health solutions, has agreed to purchase Willis Towers Watson, a risk management, insurance brokerage and advisory company, in an all-stock deal, per the Financial Times.

This deal, which is still subject to regulatory approval and is expected to close in the first half of 2021, would create the world's largest insurance broker by forming a company worth $76 billion.

The deal comes around a year after rumors first emerged about Aon looking to buy Willis Towers Watson; however, talks quickly fell apart in March, though there was no reason given. Should this new deal fall through, Aon will have to pay $1 billion to Willis Towers Watson.

The entities anticipate significant synergies from the merger and want to focus partly on innovation.

• Aon and Willis Towers Watson will consolidate parts of their businesses, leading to cost savings for the combined entity. Aon reported that there would be $800 million in annual pretax synergies and cost reductions three years after the completion of the merger, while revenues under the merger would stand at $20.1 billion with an adjusted income of $4.9 billion, per Insurance Age, compared with Aon's revenue of around $11 billion for the year ending December 31, 2019.
• Additionally, the companies say that being able to better address client demands is at the forefront of the merger. By working together, Aon and Willis Towers Watson want to focus on innovative solutions and improve their data analytics, likely by leveraging technologies like AI and automation. Additionally, the two want to strengthen their capabilities when it comes to cyber threats, an issue that has accelerated over the past years, with the global cyber security market expected to reach a market size of around $260 billion by 2025, up from just $104 billion in 2017. Under the merger, the two companies can also offer their customers a broader range of services, enhancing convenience for users, as they'll be able to access all offerings within one platform.

Consolidation within the financial industry is accelerating, and we think Aon and Willis Towers Watson are in a good position to successfully merge, given their history. A number of financial institutions have recently announced mergers: Morgan Stanley is in the process of buying E-Trade for $13 billion, and Intuit is acquiring Credit Karma for $7 billion.

The increased consolidation is likely spurred by heightened competition as fintechs establish themselves, as well as growing consumer demand for digital-first offerings. While mergers can help companies cut costs and boost their offerings to become more competitive, they also come with some hurdles in terms of potential culture clashes between firms, as well as cost- and time-intensive operational integrations.

That said, Willis Towers Watson itself stems from the merger between Willis Group Holdings and Towers Watson in 2016, giving the company a good track record of navigating big consolidations.

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