With European regulators apparently pushing for several divestments of Aon PLC before approving their purchase of competing Willis Towers Watson PLC, the structure of each sale remains wide open, analysts say.
Divestments, including potentially Willis' reinsurance department and operations in various European countries, may be made in installments or as a single transaction, but a series of transactions may be the most likely outcome, they say.
"Given the size and complexity of the concentration and the need to address antitrust issues, we believe that a combination of several smaller transactions is most likely," said Carlos Wong-Fupuy, senior director, global reinsurance ranking, at AM Best Co. in London.
Aon, the world's second largest broker, announced its agreement to buy Willis, the third largest, for about $ 30 billion in March 2020. Shortly after the deal was announced, speculation began about competition issues that could be raised by regulators, particularly related to the reinsurance brokerage sector, where Aon, Willis and Guy Carpenter & Co. LLC, owned by Marsh & McLennan Cos. Inc., dwarfs its closest competitors. However, Aon said it did not expect to be forced to divest any entities, including Willis Re.
Last year, however, European Union regulators expressed concern over the Aon-Willis affair.
EU competition arm, European Commission said it was "concerned that the transaction could reduce competition in brokerage services to large multinational clients in the risk classes real estate and accidents, financial and professional services, credit and political risks, cyber and marine and brokerage services to customers of all sizes for manufacturing risks in space and space and in some additional risk classes in specific national markets. ”
Aon later offered to sell Willis reinsurance arm, companies in France, Germany, the Netherlands and Spain. and various corporate security activities
Discussions continued and European regulators withdrew the deadline for approving the deal until July 27, delaying Aon's plan to complete the acquisition in the first half of this year. task ock so aroused concern.
“In an already highly concentrated market, it seems that the only response to the competition authorities' objections will be to divest parts of the business in certain important territories. Wong-Fupuy sa.
The list of potential acquirers can be long and includes rival brokers and private equity firms, say analysts.
Arthur J. Gallagher & Co., the fourth largest broker, which has expanded its reinsurance business, was early identified as a potential bidder for Willis Re.
Observers say another potential buyer for Willis is McGill and Partners, a broker launched by former Aon CEO Steve McGill in 201
In December last year, McGill said, "The cornerstone of any successful and efficient market is choice."
There is a "very long list" of potential buyers, including private equity firms not yet involved in the insurance brokerage sector, says J. Paul Newsome Jr., Chicago-based investment broker for investment broker Piper Sandler Cos.
“In general, private equity markets have been quite willing to buy brokers.
The final outcome will depend on the circumstances, said Wong-Fupuy.
"Whether each of these is better suited for a strategic acquisition or by private equity depends
James Auden, Chicago-based Chief Insurance Officer at Fitch Ratings Inc., said that" there are still many unknowns here. ", including what specific measures the EU may request or require
Mr. Newsome noted that many of the elements that now make up Willis Towers Watson were once individual, separate entities before being rolled up by the broker.
" They were all independent of each other at some point, so there is no need for them to remain a unit now, he said.