The Story Behind the Aon and Willis Towers Watson Deal that Died a Quick Death

March 7, 2019 by and

It’s not often that you hear about a $24 billion deal brewing in the financial services industry. It’s even rarer that it goes from confirmation to breakup in less than a day.

On Tuesday afternoon, Aon Plc confirmed a Bloomberg News report that it was considering a tie-up with Willis Towers Watson Plc — a rival with a $24 billion market value — in a deal that could have transformed the insurance brokerage industry. By Wednesday morning, the firm said it changed its mind, blaming Irish regulations that forced it to confirm the talks at a very early stage once they had leaked.

The two companies had held preliminary discussions and Aon was preparing to submit a formal offer in the coming weeks, people familiar with the plan had told Bloomberg. Talks were still in the early stages when news of the deal broke, thrusting the discussion into the public, according to a person familiar with the matter who declined to be identified. That made it difficult for Aon to move forward because it was still refining the terms of its offer, they said.

Aon said it was considering an all-share offer, a proposal that would’ve gotten more expensive after news of their deliberations sent their shares down 7.8 percent and their would-be target’s stock up 5.2 percent by the end of Tuesday. That negative market reaction didn’t help the situation, the person said.

Willis slumped 6.3 percent to $170.66 at 10:17 a.m. in New York, the biggest decline since August. Aon climbed 5 percent to $164.47.

Representatives for Aon and Willis declined to comment.

Analysts at Wells Fargo & Co. pointed out that regulatory issues were bound to be a big overhang for a deal as Aon and Willis are the second- and third-largest insurance brokers by revenue.

“Regulatory issues among others, including accretion, lost business, etc could have impacted its decision not to pursue a deal at this time,” the bank said in a note Wednesday.

There’s a chance this won’t be the end to the Aon and Willis saga. Aon said in its Wednesday statement that it reserved the right within the next 12 months to set aside that announcement that it wasn’t intending to pursue the Willis deal.

While regulations restrict Aon from reaching out to Willis for at least a year, a person familiar with the matter said, Willis is still free to approach Aon if it wants to pursue a deal.

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