Aon confirmed Tuesday that it is in the early stages of considering an all-stock merger with rival insurance brokerage Willis Towers Watson, according to a statement from Aon, in what could be the industry's largest merger.
"(Aon) emphasizes that, at this point, its evaluation of a potential transaction is at a preliminary stage and there can be no certainty that any transaction will take place nor as to the form or terms on which any transaction might be pursued," Aon said in a written statement.
Both firms have large investment consulting businesses servicing institutional investors.
As of June 30, Aon had $3.12 trillion in assets under advisement and was the second largest consultant by AUA and Wills Towers oversaw $2.2 trillion for a seventh place ranking in Pensions & Investments' ranking of investment consultants based on data provided by each company.
If Aon's acquisition goes through, the units' collective $5.32 trillion would keep the combined consulting entity in second place in P&I's ranking of investment consultants by AUA behind Mercer, which had $11.63 trillion as of June 30, with more than double the AUM of third-place ranked Cambridge Associates' $2.58 trillion.
The aggregate AUA from U.S. institutional tax-exempt investors overseen by Aon and Willis Towers totaled $3.11 trillion as of June 30, surpassing Mercer's $2.55 trillion, putting a combined Aon-Willis Towers investment consulting unit at the top of the ranking in this universe.
Shares of Willis Towers jumped as much as 8.3% to their highest price ever and traded at $182.72 at 9:46 a.m. in New York, valuing the company at almost $24 billion. Aon was little changed at $169.85 for a market valuation of about $41 billion.
Beyond the news release, a representative for Aon declined to comment, while Willis Towers couldn't be immediately reached for comment.
The companies have held preliminary talks, people familiar with the matter said.
Brokerages — which help connect businesses looking for coverage with insurers — have been aggressively merging in recent years to diversify, boost commissions and serve customers that increasingly want to deal with fewer intermediaries.
Buying Willis Towers would potentially enable Aon to overtake Marsh & McLennan Cos. as the world's largest brokerage by revenue, according to data compiled by Bloomberg. Willis Towers is the world's third-biggest brokerage, while Aon is No. 2.
Willis Towers was formed in 2016 through Willis Group Holdings' $8.9 billion acquisition of the consultancy Towers Watson & Co., the largest insurance broker deal to date.
Aaron Cunningham, Amy Resnick, Christine Williamson and Bloomberg contributed to this story.