Aon Willis merger collapses

Posted 05/08/2021 – Quick takes

The proposed merger of Aon and Willis Towers Watson has been cancelled, following opposition from the US Department of Justice (DoJ).

The $30bn deal was set to create the world’s largest insurance broker but the DoJ blocked the deal over fears that the merger would be anti-competitive in a number of areas, including property, casualty and financial risk broking for large clients and reinsurance broking. Aon and Willis initially sought to find a resolution and had an agreement to sell Willis Re to AJ Gallagher, but Greg Case, Aon CEO, said that they had reached an “impasse” with the DoJ, leading them to pull out of the deal.

Despite having to pay a $1bn breakup fee to Willis as well as other penalties and suffer many staff departing, Aon are thought to have done less badly than Willis in the fallout with their share price rising by nearly 10% following the news, with Willis’ falling by a similar amount. Since the merger was cancelled, Aon has extended Greg Case’s contract by 3 years and Willis is still considering the sale of its reinsurance arm.

Alpha comment

This is a good outcome for the market. The merger of two of the largest broking houses would have placed even more of power in the hands of the brokers and limited the opportunities for syndicates to make the most of hard market conditions. The short-term chaos created by the proposed merger has actually created a more balanced broker market in London, as many individuals have departed Aon and Willis for smaller brokers, which should create a more competitive broking environment and give our syndicates increased choice on who they do business with.

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