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Aon/WTW deal entering critical stage as US DOJ refuses to show its hand: reports

2nd June 2021 - Author: Staff Writer

Reports emerging from specialist publisher The Capitol Forum describe The US Department of Justice (DOJ) as having adopted a dual-track strategy for its review of Aon’s proposed acquisition of rival broker Willis Towers Watson.

aon-willis-towers-watson-merger-antitrustBy simultaneously engaging in settlement talks and ensuring trial preparations are underway should it decide to mount a challenge against the deal, reports describe the DOJ as having potentially created a situation in which an offer of additional divestitures from Aon and WTW is more likely.

The DOJ is described as having employed similar tactics during Halliburton’s 2016 divestiture proposals, before opting to mount an offensive against it in the courts.

Concurrently, however, it’s a tactic that is reported to have been seen prior to successfully negotiated deals, and in fact there’re currently no hints at which way the Department could swing.

Reports describe this 14 month extended period taken by the DOJ to mull its options as unusual, but not unheard of.

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In fact, the DOJ is said to have been seriously considering Aon’s recent $3.6 billion divestment package, with staff having met with representatives from the merging companies and proposed asset buyer Gallagher.

When news of the remedy proposals first broke in April, it was considered a clear attempt to appease the DOJ and help push through a deal that is thought to have first been tabled in January 2019.

However it was uncertain whether Aon’s effort would indeed satisfy the Department’s expectations; suggestions were made that a package larger than the one offered up to the European Commission (EC) would be required.

Before that in March, the main concern from the US was believed to have had a reinsurance focus, as well as in other areas like benefits and large corporate clients.

Indeed, a majority of our industry sources at the time were growing increasingly confident the sale of reinsurance broker Willis Re would be required.

Typically, the US Antitrust Division of the Department of Justice looks for clear evidence of pricing power being uneven due to a merger or acquisition before it will highlight any concerns.

Specialist antitrust and M&A publisher CTFN claimed the Antitrust Division was in a holding pattern, waiting on direction from the Biden administration.

Now, reports hint that Aon’s remedy package hinge on its ability to establish Gallagher as a strong enough option for international insurance broking customers.

Opponents of the proposed mega-merger are already reported to have dismissed the package’s size and scope as incapable of achieving such a shift.

One of the arguments being made against Aon’s remedy package is said to be the absence of any measures addressing its overlap with WTW in health benefits consulting services.

Industry figures are claimed to have stressed the extent to which large companies are reliant on Aon, Willis and Marsh’s Mercer for these services, labelling the top three players’ rivals as too small to operate as viable competitive options.

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