Industry sources expect upheaval for clients and employees as executives work through the details of Aon PLC's purchase of Willis Towers Watson PLC.
The two firms — known in institutional circles as investment consulting and outsourced CIO giants — announced March 9 they will combine by mid-2021. The agreement, which is subject to regulatory approvals, will see Aon buy rival WTW in an all-stock $30 billion deal, creating an $80 billion firm.
Pensions & Investments data show Aon had $3.52 trillion in institutional assets under advisement as of June 30, while WTW had $2.6 trillion. The combined total still leaves the firm behind Mercer, with assets under advisement of $15 tril- lion. The combined firm would have ranked as the largest outsourced manager, with $290 billion in OCIO assets under management, according to P&I data as of March 31, 2019. Mercer had $230 billion as of that date.
The combined firm will be led by Aon CEO Gregory C. Case and Aon Chief Financial Officer Christa Davies. WTW CEO John Haley will become executive chairman. Aon shareholders will own about 63% of the new firm — named Aon — while WTW shareholders will own about 37%.
While investors and money managers know Aon and WTW for their prowess in the retirement business, sources think their investment consulting, OCIO and actuarial units are actually "collateral damage" in a deal that is, ultimately, about insurance.
"You can look at the Mercer/JLT deal as a template" in that the attraction is the insurance business, said Dean Wetton, managing director at investment consulting firm Dean Wetton Advisory Ltd. in London, referring to Marsh & McLennan Cos. Inc.'s 2019 acquisition of Jardine Lloyd Thompson.
"I think it's purely an insurance play — that's what drove the Mercer/JLT merger, and I genuinely think investment consulting and fiduciary management are a side issue for them. Compared to the revenues from insurance, it's not the main driver," said Roger Brown, founder and director of IC Select Ltd. in Edinburgh, which helps retirement plans evaluate and choose investment consultants and OCIOs. "I think we call it collateral damage. In actual fact, I can't see any great logic … if it weren't for the insurance business, would Aon be looking to buy WTW and vice versa?"