Aon and Willis Towers Watson Merger Faces Civil Suit from Department of Justice
In March 2021, brokerages Aon and Willis Towers Watson announced their plans to combine in an all-stock transaction as a means to accelerate innovation within both organizations to benefit clients.
The press release noted in detail the strengths they determined to be gleaned by both parties and clients in the merger, detailing technology-enabled global platforms, opportunities to expand execution of growth strategies, an on-going commitment to clients and more.
But by June 2021, not everyone was as thrilled with the intended merger.
The U.S. Justice Department filed a civil suit aimed at stopping the estimated $30 billion acquisition, deeming the transaction a reduction in competition that could lead to higher pricing.
As the department put it, the deal would combine two of the “Big Three” global insurance brokers. (The third being Marsh McLennan.)
“[This] action demonstrates the Justice Department’s commitment to stopping harmful consolidation and preserving competition that directly and indirectly benefits Americans across the country,” said Attorney General Merrick B. Garland.
“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,” he further said in the press release attached to the complaint.
Aon and Willis Towers Watson responded in earnest, stating, “We disagree with the U.S. Department of Justice’s action, which reflects a lack of understanding of our business, the clients we serve and the marketplaces in which we operate.”
In their joint statement, Aon and Willis Towers Watson further stated their desire to “accelerate innovation on behalf of clients creating more choice in an already dynamic and competitive marketplace.”
The brokerages are prepared to continue forward with the suit, whichever way it may go. Aon has tapped a team of antitrust partners at Latham & Watkins, which is one of three law firms that advised on the initial merger deal.
If the suit does make it to trial, predictions thus far are still up in the air as to which way the gavel will fall.
Investing community Seeking Alpha has already noted a 50/50 chance of Aon winning against the DOJ. It also anticipates a trial — if that is the end result — will likely last two to four weeks this fall.
Final results will remain to be seen until then.
Scorecard: While nothing is certain yet, this will be one to watch for the insurance industry. You can read more details here from the New York Times. Also, here’s a direct link to the complaint filed by the DOJ.
Takeaway: Innovation is a big part of business these days, and those that innovate often find great success. But it is wise to be wary of the implications of innovation beyond the business’ four walls. Will everyone agree with innovation tactics? Or could larger organizations possibly find a way to step in? &