Is an Aon-Willis Merger Coming?

Could further consolidation within the HR consulting ranks be on the horizon?

Aon confirmed in a statement on Tuesday that it is in the “early stages of considering an all-share business combination with Willis Towers Watson,” adding that there’s “no certainty that any transaction will take place nor as to the form or terms on which any transaction might be pursued.” The comment came on the heels of a Bloomberg story earlier in the day that cited unnamed sources who said Aon was considering acquiring Willis.

A representative for Willis declined to comment.

Were the merger to take place, it would make the combined entity the world’s largest insurance brokerage, surpassing Marsh & McLennan, parent of Mercer, in revenue size. It would also bring together two of the biggest names in HR and benefits consulting.

The move comes roughly three years after Willis Group’s merger with Towers Watson.

Industry analyst Josh Bersin notes that in the HR market, the two companies have complementary and some duplicate offerings. “Aon has focused on outsourcing and value-added service delivery and Towers Watson has focused on value-added services and products,” he says. “The potential for synergy is enormous, but the merger will require a lot of internal organizational transformation.”

One analyst, however, said she was skeptical a deal could get done. According to Bloomberg, Wells Fargo & Co. analyst Elyse Greenspan wrote in a note to clients that she sees “regulatory issues being a big overhang for a deal due to the size of both companies” and that she “was not convinced a deal can come to fruition.”

Willis Towers Watson shares closed up 5.2 percent at $182.04, while Aon fell 7.9 percent to $157.25.

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