Arthur J Gallagher could still seek an acquisition of all or parts of Willis Towers Watson including Willis Re after the deal with Aon fell through, according to Bloomberg Intelligence (BI).

Gallagher had a US$3.6bn agreement to buy several Willis businesses which was contingent on the Aon deal but dislocation at Willis and uncertainty over the CEO could mean the insurance broker is open to working with Gallagher, says BI.

The initial deal between Willis and Gallagher was agreed to remedy European Commission concerns and BI estimates that it would have added an estimated 9% to 11% to 2020 earnings per share. Matthew Palazola, senior industry analyst at Bloomberg Intelligence, said: “The biggest risk in our view was a culture clash but Gallagher has successfully integrated large European businesses in the past.”

The BI report, Gallagher May Still Seek Transformative Deal, says Gallagher could acquire Willis Re – described as the Crown Jewel of the previous agreement with an estimated US$750m of revenue. If Willis Towers Watson remains independent, it is likely to want to retain Willis Re but if Gallagher acquires the business, it will become the third largest global reinsurance broker from its current fifth position.

Willis Re was seen as a regulatory hurdle in the Aon purchase of Willis as it would have made the combined firm a large leader in the reinsurance brokerage market creating a duopoly with Marsh McLennan.

Meanwhile, José Manuel Fonseca, chairman of broking company Brokerslink, hailed the termination of the Aon and WTW merger as “a victory for competition and for business”.
He said: “Creating value from M&A needs to look beyond pure shareholder benefits. It must be the trigger for innovation, liberating talent, new ideas and products offering alternative solutions to the traditional markets.

“Risk managers had expressed concern about the value and potential impact that the merger would have created in terms of choice. Whether this changes now that the deal is not proceeding will be closely watched by the profession.

Fonseca added that he believes a dynamic global broking landscape has evolved in part because of the proposed merger. “We have seen new players, brokers investing in expanding their geographic footprint and the movement of talent between competitors. Greater competition and market disruption has no doubt created opportunities and Brokerslink has seen an expansion of its network and recognition of the importance of a truly independent global broking alternative.”

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