In offering deal-related concessions to the European Commission, Aon and Willis Towers Watson have shown their “willingness to complete even a partial deal,” according to equity analysts at Keefe Bruyette & Woods (KBW).
As we reported earlier this morning, the European Commission has restarted the clock on the Aon and Willis Towers Watson merger after a roughly two month pause while the regulator awaited further information from the merger parties.
Now, the European Commission (EC) has received what is presumably details of a package of proposed concessions, something the EC terms “commitments”, which were submitted on April 9th, according to the regulator’s website.
As a result, the deadline suspension, or pausing of the merger investigation, has been halted as of April 9th as well, with the deadline now moved forwards from the previous May 10th, 2021 date, to a new date in the second-half of the year of July 12th.
KBW’s analysts note that this moves the deadline for an EC decision on the merger into the second-half, when the parties had repeatedly explained they were targeting the first-half of 2021 to close the transaction.
However, the analyst believe that the fact concessions have been confirmed as offered, “demonstrates AON’s and WLTW’s willingness to complete even a partial deal.”
“We believe regulators aren’t entirely opposed to the AON/WLTW combination, and would approve it given adequate divestitures,” KBW’s analyst team explained.
Adding, “We think the news highlights AON/WLTW’s willingness to complete even a deal for less than 100% of WLTW.”
The analysts reiterate the broadly held opinion that reinsurance unit Willis Re could be among the concessions offered, as well as certain European operations, with France (likely Gras Savoye), Germany, Spain and the Netherlands all cited as possible regional divestment locations.
“We believe AON wants to buy as much of WLTW as possible, but even a partial WLTW purchase (we have no reason to doubt that AON is targeting a significant majority of WLTW’s $9.35 billion of 2020 revenues) should provide enhanced scale and margin expansion opportunities,” the analysts concluded.
Back in early March, our sources told us that a package of divestiture needed to get the merger completed could approach the cap on divestitures, of $1.8 billion of revenue.
Sources today suggest there’s a chance the deal could still be pushed through even if concessions rose above that revenue cap, as the benefits to Aon of securing even the partial global business of Willis Towers Watson would still enable it to achieve the kind of revenue growth acceleration it is seeking.
Clearly, there will be a point at which Aon would want to walk away. But where exactly that point is remains unclear and will depend on the exact demands of competition authorities globally and how that conflicts with Aon’s ambitions for post-deal growth and market-positioning.
Read our previous coverage of the Aon and Willis Towers Watson merger here.
