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What A Difference A Day Makes

Aon/Willis merger

Image source: Leremy, pockygallery - Shutterstock

What's going on?

A week is a long time in politics, but a day is a long time in business: that’s how long it took giant British insurance broker Aon to back out of buying Irish rival Willis Towers Watson.

What does this mean?

Aon – which links up insurance buyers and sellers in 120 countries worldwide – was forced by strict Irish rules to announce on Tuesday that it was looking at snapping up Willis. Aon stressed that its purchase plans, which would’ve created the world’s biggest insurance broker, were at a very early stage – partially explaining its about-face on Wednesday.

Aon said that it would’ve met the $24 billion-plus price tag for Willis by giving its shareholders stock in the new, combined company. But just a day later, the party was canceled.

Why should I care?

For markets: Big deal, big risk, big hurdles.

Shares of Aon dropped 7% on Tuesday’s news – their biggest fall in a decade – before making up some of those losses on Wednesday. And Willis shares shot up 6% before falling back down again. The deal would have been the industry’s largest ever: potentially a nice payday for Willis’s investors, but a challenge for Aon – especially since Willis is itself the product of an only three-year-old merger. That’s assuming a deal ever got approved. With Aon the world’s second-largest insurance broker and Willis number three, it might’ve been hard to get European regulators in particular on board. They could have forced the companies to sell off parts in order to preserve healthy competition in the insurance market.

Zooming out: Not all attention is good attention.

Willis may have dodged a political bullet: New York state authorities issued Aon with a subpoena on Monday. They’re demanding documents relating to the US president’s eponymous company – which Aon insures – as part of a broader investigation into its business practices.

Originally posted as part of the Finimize daily email.

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