AON and Willis Towers Watson logos

Aon-WTW mega-merger hits a major snag


The ongoing acquisition saga between two global financial services giants Aon and Willis Towers Watson took another twist last week after the US Department of Justice (DOJ) launched a landmark antitrust case to block the $30 billion deal, citing anti-competitive risks of combining the two already oligopolistic firms.

Announced in March, the Aon-WTW mega-merger – with all businesses intact – would create a firm with nearly 100,000 employees in 140+ countries and annual revenue of $20 billion.

“As alleged in the complaint, Aon and Wills Towers Watson operate ‘in an oligopoly’ and ‘will have even more [leverage] when [the] Willis deal is closed’,” the DOJ said in a statement.

“If permitted to merge, Aon and Willis Towers Watson could use their increased leverage to raise prices and reduce the quality of products relied on by thousands of American businesses — and their customers, employees, and retirees.”

Aon and WTW, both incorporated in Ireland and headquartered in London, formally launched the merger process over a year ago in a bid to unite two of the “Big Three” global insurance brokers. The third is Marsh McLennan.

Given the global reach, Aon and WTW required approval from regulators in multiple jurisdictions for the deal to go ahead with a decision also pending in Europe. Reuters reported on April 28 that the EU’s executive arm would clear the mega deal after Aon offered to sell substantial assets. However, insurance industry publications cite sources suggesting that other international competition authorities are in a holding pattern after the DoJ’s lawsuit move, as antitrust and competition authorities from around the world do tend to work closely together.

Aon and WTW have sold a number of subsidiaries in recent months to meet regulatory concerns. Most recently, Aon announced the sale of its US retirement business to private equity firm Aquiline Capital Partners and the Retiree Health Exchange to tech firm Alight for $1.4 billion. In May Aon also hived off its German pensions businesses to retirement investment firm Lane Clark & Peacock. Meanwhile, Arthur J. Gallagher & Co agreed to acquire select reinsurance, specialty, and retail brokerage operations from WTW for $3.57 billion.

US Attorney General Merrick Garland said in the DOJ statement: “Today’s action demonstrates the Justice Department’s commitment to stopping harmful consolidation and preserving competition that directly and indirectly benefits Americans across the country.

“American companies and consumers rely on competition between Aon and Willis Towers Watson to lower prices for crucial services, such as health and retirement benefits consulting. Allowing Aon and Willis Towers Watson to merge would reduce that vital competition and leave American customers with fewer choices, higher prices, and lower quality services.”

Following the DOJ’s announcement, Aon and WTW in a joint release expressed their disagreement and accused the DOJ of failing to understand their businesses, clients they serve, and the marketplaces in which they operate.

“We continue to make material progress with other regulators around the world and remain fully committed to the benefits of our combination” the firms added.

It remains to be seen what happens next in the saga. If the deal does move ahead, Aon would maintain operating headquarters in London, and its circa 50,000 employees and $11 billion revenue would be joined by Willis Towers Watson’s 45,000 staff and $9 billion revenue.

UPDATE 03/08/2021

The U.S. regulator killed the Aon-Willis merger. Aon will pay a US$1 billion break fee to WTW after the proposed marriage between the two firms fell over.

“Despite regulatory momentum around the world, including the recent approval of our combination by the European Commission, we reached an impasse with the U.S. Department of Justice. The DOJ position overlooks that our complementary businesses operate across broad, competitive areas of the economy. We are confident that the combination would have accelerated our shared ability to innovate on behalf of clients, but the inability to secure an expedited resolution of the litigation brought us to this point” Greg Case, Aon global chief, said in the release.