Aon’s $30bn acquisition of Willis Towers Watson collapses

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Aon and Willis Towers Watson have abandoned a $30bn tie-up that would have created the world’s biggest insurance broker after the US government sued to block the combination.

Aon’s chief executive Greg Case said on Monday that the companies had reached an “impasse” with the US Department of Justice, which had taken a position that “overlooks that our complementary businesses operate across broad, competitive areas of the economy”.

The all-share deal, which was first struck in March 2020 as the coronavirus pandemic swept across the globe, was the latest in the long-running consolidation of the insurance broking industry.

However, in a lawsuit filed last month to block the transaction, the DoJ offered a scathing critique. The deal would create a “Big Two” in insurance broking and would “eliminate substantial head-to-head competition and likely lead to higher prices and less innovation, harming American businesses and their customers, employees and retirees”, the suit said.

As a result of the decision to drop the merger, Aon will pay a $1bn break fee to Willis.

John Haley, Willis’s chief executive, said his company was “well-positioned to compete vigorously across our businesses around the world and will continue to introduce important innovations to the market”.

The surprise announcement came as Aon, Willis and the DoJ prepared for a showdown in the US courts.

A judge had decided that the trial would start in November, two months after Aon and Willis had wanted. That would have pushed completion of the deal beyond the third-quarter target.

“If we lose [the case], we’re in a world of hurt,” Aon’s lawyer told the court.

A drawn-out legal battle would have risked pushing clients and employees to look elsewhere, analysts had warned.

The other option would have been to make deeper disposals in the US that could have chipped away at the merger’s advantages: Aon had already offered to sell its US retirement business and its Aon Retiree Health Exchange operation, but the DoJ said the proposed divestitures did not go far enough.

Aon’s shares rose strongly by 6 per cent after the opening bell in New York, while Willis’s fell 5 per cent.

At its quarterly results last week, Marsh McLennan, the world’s largest insurance broker, had said it was benefiting from the “distraction and uncertainty” surrounding its two key rivals.

The group’s chief executive Dan Glaser said almost 2,000 staff had joined the company since the start of the year, with most coming within its insurance broking division, which has lured staff away from Aon and Willis.

The decision to drop the deal comes after competition authorities in the EU, the companies’ other key market, gave the deal the green light earlier this month.

Aon and Willis had agreed to sell $3.6bn worth of assets to their rival Gallagher to smooth that aspect of the deal. But the Gallagher disposals were subject to approvals, including regulatory sign-offs for the Aon and Willis combination.

Aon also announced on Monday that it was extending the employment agreements of Case and chief financial officer Christa Davies for another three years.