Marsh & McLennan Moved Quickly as Stars and People Aligned in JLT Deal

Marsh & McLennan Inc. (MMC) has been preparing for a major acquisition and admiring its competitor Jardine Lloyd Thompson (JLT) for years. So right after the CEOs of the two firms met on Sept. 7 and he sensed an opening, MMC CEO Dan Glaser acted quickly and boldly.

In a deal that was hammered out in about 11 days, Glaser and JLT Group CEO Dominic Burke agreed MMC would buy JLT for about 4.3 billion pounds ($5.6 billion).

“JLT hit every one of our boxes,” Glaser said, citing his firm’s philosophy that acquisitions bring quality talent, strong organic growth, customer commitment, diversification, cost and revenue synergies and other qualities — all of which it found in JLT.

“We needed to build a proper foundation so we could be prepared for a large transaction like this,” Glaser said, addressing why it had not made such a major deal years ago.

But for any transaction to happen, the time has to feel right. “The stars and moon have to align for both companies,” he told analysts about his meeting with Burke. “Both sides needed to think the timing was right.”

The price has to feel right, too. MMC gave JLT shareholders, including Jardine Matheson Holdings that owns 40 percent, an offer they couldn’t refuse. The 19.15 pounds-a-share ($25.11) offer is a 34 percent premium to JLT’s closing price on Monday and 25 times JLT’s estimated 2019 earnings.

The purchase will strengthen MMC’s specialty risk brokerage operations, expand its global reinsurance network and enhance its position in Asia and Latin America.

The deal will boost MMC’s revenues by about $17 billion. The company expects some cost savings (about $250 million over three years) and faster revenue growth from the smaller JLT. Glaser said “JLT skews into higher growth areas” thus “it should provide a lift over time.”

Glaser also noted that JLT has outperformed its peers, averaging 5 percent organic growth since 2012. MMC has been averaging about 3-5 percent revenue growth a year.

Glaser said while the acquisition makes his firm bigger, it mainly “accelerates” MMC’s existing strategy and aspiration to be the preeminent global firm in the areas of risk, strategy and people. It is no great departure from what it now does. “It’s keeping within our knitting,” he said.

Moving beyond the deal terms and potential, in his call with analysts after the deal was announced, Glaser could not stop talking about the people. The deal will add about 10,000 employees to the 55,000 MMC already has globally.

Glaser said he has known Burke for 15 years and long respected him and the company he runs. Burke will join MMC as vice chairman and serve as a member of MMC’s Executive Committee.

Together MMC and JLT will have “the broadest and deepest collection” of talent in the industry, Glaser maintained.

“On any given day they could have beaten any broker on an account. They are highly skilled, highly motivated, highly specialized,” he said.

The accolades kept coming: “JLT punches above its weight…;” the deal is a “tremendous injection of talent…;” JLT is “excellent in everything they do…;” and JLT people share MMC’s “culture of integrity” and “relentless focus on client service.”

Asked how he will unite the cultures and hang onto employees, the MMC CEO maintained that the cultures are very similar and that the resulting company will be “the employer of choice” in the sector.

He expressed the same attitude toward keeping accounts: “We’re not giving up any accounts. We will fight to keep every account.”

While JLT has some traditional wholesale business in its mix, Glaser said the deal does not mean Marsh is getting back into the wholesale business it exited when it sold its wholesale broker Crump in 2005. He said the term wholesale is an “archaic one” for what he says has become specialty placement business rather than traditional third-party wholesale brokerage business. He said every business has some, but JLT “does not have a dramatic amount “of third-party wholesale business. “It’s not like we are entering a market we exited when we sold Crump,” he commented.

As for upping its stake in the UK at a time when Brexit has many people anxious, Glaser shrugged, “so what.” He said the UK is a “great place for business,” with resilient and remarkable people.

“We’re happy to bet on Britain,” he said.