Aon Buys Hewitt Associates for $4.9 billion. But, why?

This is interesting news for people in the HR industry. Insurance broker Aon Corp is to buy Hewitt for about $4.9 billion According to Reuters:

Aon plans to integrate Hewitt with its existing consulting and outsourcing operations and sees annual revenue of $4.3 billion for the combined entity, which will be named Aon Hewitt.

Russ Fradin, chairman and chief executive officer of Hewitt, will head Aon Hewitt.

Aon expects the deal to add to 2011 and 2012 earnings and generate about $355 million in annual cost savings in 2013, primarily from reduction in back-office areas.

The Aon-Hewitt deal is the second major deal in the consultancy space in a year after Towers Perrin and Watson Wyatt agreed to a $3.5 billion merger to create the world’s largest HR consultants.

The insurance brokerage expects to finance the deal through a $1.5 billion bridge facility and $1 billion bank term loan.

I really don’t see a reason why an insurance broking firm sees the need to acquire a HR Consulting and Outsourcing organization.  Who has some thoughts?  Leave a comment

Hewitt has a big outsourcing facility in India – and looks like they’ll be getting a lot more outsourcing work in the insurance space – but what it means for existing Hewitt Associates clients and employees in India will become clear soon.

In India Aon has a small operation, as its website states

Aon Global Insurance Brokers Pvt Ltd. (Aon Global) is a joint venture between Mr. Prabodh B. Thakker of Global Insurance Services and Aon Corporation. Aon Global is the leading insurance intermediary in the Indian market.

Aon Global is a Composite Broker licensed by the Insurance Regulatory and Development Authority. As a Composite Broker, Aon Global is permitted to offer both reinsurance and corporate (domestic) broking solutions to its clients. Aon Global combines international expertise and local knowledge to provide value added, professional, cutting edge risk management and insurance solutions to its clients. The company is the leading broker for placement of facultative risks in the aviation and energy sectors.

Aon Global became operational on March 3, 2003. The company is headquartered in Mumbai, has offices in Delhi, Chennai, Bangalore and Pune. The company has 80 staff members on its rolls, 60 of whom are insurance professionals having the requisite qualifications and experience to meet client needs.

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