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Aon – Willis and US DoJ may be able to settle early on three counts

21st July 2021 - Author: Steve Evans

According to court documents, it appears that Aon, its acquisition target Willis Towers Watson (WTW) and the US Department of Justice (US DoJ) are hoping to reach a settlement quickly on counts related to three of the market segments where the mega-merger was deemed potentially anti-competitive.

Aon and Willis Towers Watson logosIt’s news that could signal a chance of settling some of the counts prior to the trial beginning, which would be hoped to make the courts process a bit faster for the merger parties.

However, the trial commencement date remains set for November 18th at the moment, still beyond the Outside Date of September 9th, 2021, set out in the defendants’ March 2020 Business Combination Agreement.

As we explained in our last updates on the biggest merger in insurance and reinsurance broking history, the debate over the scheduling of key dates in the legal process continued, as Aon and Willis Towers Watson sought to bring the trial date forward to accelerate the completion of their $30 billion merger.

We also reported more recently that in a hearing recently the US Department of Justice agreed to adjust its timeline to deliver important information related to its earlier investigation of the antitrust case to the courts much faster than previously anticipated, while the Judge accused the US DoJ of prolonging matters.

In the latest set of court documents we’ve seen, the November 18th trial commencement remains, but with a significant amount of work in the interim to prepare both sides of the argument, present data and information.

Perhaps more important than dates though, is the potential for some of the counts in the complaint to be settled early.

As a reminder, the original complaint from the US DoJ was split into five market segments, where it felt the merger could prove anti-competitive.

These were: (1) property, casualty, and financial risk broking for large clients; (2) health benefits broking for large customers; (3) actuarial services for large single-employer defined benefit pension plans; (4) the operation of private multicarrier retiree exchanges; and (5) reinsurance broking.

In the latest documents, a now agreed scheduling and case management order states, “The Parties have not been able to settle the allegations for two of the five relevant product markets in the Complaint: Count One and Count Two.”

But positively for Aon and WTW’s ambitions to get the merger over the line, it also says, “The Parties may, however, be able to agree on settlements to resolve the anticompetitive effects alleged for three of the five relevant product markets in the Complaint: Count Three, Count Four, and Count Five.”

So the three market segments where an earlier settlement could be possible are: actuarial services for defined benefit pensions; retiree exchanges; and reinsurance broking.

Some of these areas are already addressed under divestitures planned, in particular reinsurance broking with the expected sale of Willis Re to Gallagher, if the merger closes.

For counts 3 and 4 there could be additional divestment offers required, but either way these areas seem less of a concern for the US DoJ, likely helped by earlier international divestitures.

“To maximize judicial efficiency in the present proceeding, the Parties will negotiate, in good faith, to finalize a consent decree with respect to the Potential Settlement Markets to preserve the competition in those relevant product markets that the United States alleges in the Complaint will be harmed by the Planned Transaction,” the case management and scheduling order states.

If such a consent decree can be agreed upon then those market segments would not proceed through the rest of the laid out trial process it appears, greatly reducing the burden for both sides, we’d imagine.

Positively for merger parties Aon and WTW, the deadline to agree on a consent decree for these three counts is August 9th, well before the trial start date.

Which would enable Aon and WTW to move into the trial process more focused on the remaining two counts, one and two, covering large corporate risk broking and health benefits broking.

On those two counts, the schedule now needs any new remedy proposal to be submitted by August 16th, after which the pre-trial process will continue.

It’s not immediately clear whether the trial process could be shortened if such a remedy offer was deemed to satisfy the US DoJ’s complaints in full, but it seems likely this is at least possible.

The fact these three counts and market segment complaints could be settled early and before the need to go to trial will be a substantial benefit to the merger parties and could help to accelerate the whole process somewhat, by simplifying the matter and making the eventual trial less burdensome, at least.

There’s still a way to go, of course and right now we’d imagine the parties are equally focused on getting these three counts settled, as on coming up with a remedy package that can fully satisfy any complaint on the remaining two.

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