Aon-Willis deal could face further EU probe
The EU Commission’s preliminary review is set to close on December 21 for the deal that would create the largest insurance broker globally.
The Aon-Willis Tower Watson proposed merger, valued at nearly $30 billion, is reportedly facing a full-scale review by the EU commission, according to Reuters. The investigation, which could take up to five months, would start following the regulatory body’s preliminary review that is slated to end December 21.
The increased scrutiny isn’t a surprise given the size of the all-stock transaction, which would be the largest deal in insurance history and create the world’s largest insurance broker. However, analysts are optimistic the deal will be finalized.
The main issue at hand is concern over competition, according to Joseph Marinucci, senior director at S&P Global Ratings and a primary analyst monitoring Aon. He told PropertyCasualty360.com that a restructuring of the deal could be possible.
“There is always some potential and consideration for divestitures and reworking of the combined business,” he said, adding: “Coming out of it, you’d expect to see strong components of both remaining intact.”
However, divesting divisions might not be necessary as Willis Tower Watson and Aon cover very different market segmentations, according to Marinucci. Willis Tower Watson is more focused on the middle market, while Aon caters to the world’s largest multinationals and strongest domestic companies.
Aon eyeing middle-market?
Noting there are some elements of competition concerns in the deal, Marinucci stressed he sees it as adding strength to Willis Tower Watson’s operations while helping Aon keep up with its competitors.
“This is one way for Aon to meaningful scale-up in the middle-market segment, where it hasn’t had the type of presence that its main competitor has been able to develop through the years,” he said.
If it closes, the deal could cause further bifurcation among the top two players in the already extremely fragmented insurance market. “As it relates to distribution, clearly the two very largest players are further setting themselves apart,” he added.
For the long-termer, Marinucci suggested more consolidation of the middle-market should be expected.
“Right now, there are 10-15 mid-market players that have been growing rapidly, and that is a key trend to come,” he said. “It is a very hot deal market, with a red hot capital market supporting the deal-making.”
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