Aon to Buy Middle-Market Broker NFP for $13.4 Billion
Aon plc this morning said it has a $13.4 billion deal in place to purchase broker NFP to expand its middle-market segment.
The purchase price will be funded by $7 billion in cash and $6.4 billion of Aon stock. Closing is expected mid-2024, Aon said.
“We have continually evolved our leading capabilities to better serve our clients’ growing needs amidst increasing volatility across the marketplace,” said Greg Case, CEO of Aon, in a statement. “The acquisition will advance our relevance to clients, create opportunities for our colleagues and further strengthen our shared cultural values.”
“Doug and NFP have built an exceptional team, with a complementary one-firm mindset, and we expect to both learn from their entrepreneurial culture and share with them the depth and breadth of our capabilities to create more value for clients, colleagues and shareholders,” Case added.
Aon-NFP Merger a Win-Win for Middle Market Segment, Aon Says
NFP has used M&A to grow, with more than 200 completed transactions since 2018. According to its website, New York-based NFP in 2022 had P/C revenue of $738 million as well as $1.1 billion in revenue from benefits and life, and $362 million in revenue from its wealth and retirement business. About 88% of revenue comes from the U.S. NFP ranked No. 10 in Insurance Journal‘s 2023 Top 100 P/C Agencies list based on P/C revenue.
Aon and NFP, with about 8,000 employees, will operate separately until the expected mid-2024 closing date, but Aon said financial considerations of the agreement are calculated based on a closing date of June 30, 2025.
“This is an exciting milestone in NFP’s evolution that reflects the tremendous quality of the business we’ve built and the exceptional people who drive our success,” said Hammond. “Aon is an industry leader in delivering risk capital and human capital capabilities and this acquisition is compelling for many reasons. Our clients will benefit from Aon’s global resources and distribution, while our people will have more opportunities to accelerate the growth of NFP.”
Aon said the transaction is expected to generate more than $2.8 billion in pretax gains, excluding about $400 million in expected one-time transaction and integration costs.
Aon’s last attempt to buy a major competitor hit a wall when the U.S. Department of Justice said a proposed deal to purchase WTW in early 2020 was anticompetitive. The deal was originally announced in March 2020 and was finally abandoned in July 2021. The DOJ filed a civil antitrust lawsuit in June 2021 to stop the merger. Aon ultimately had to pay approximately $1.4 billion to pull the plug on the deal.
Aon said the NFP transaction is another step in its ongoing Aon United strategy, a program that has been operational since 2010, which aims to harness the company’s global capabilities for its clients – this time in the middle-market segment. The deal follows Aon’s recently announced restructuring charge of approximately $900 million, which is expected to drive about $350 million in annual, run-rate savings by the end of 2026, Aon continued.
“The firm’s Aon United strategy, Aon Business Services operating platform and investments in advanced analytics have driven a long-term track record of results and the acquisition will enable the combined firms to efficiently deliver content and capabilities to the middle-market segment,” Aon said.
“Aon maintains an ongoing commitment to long-term financial goals of mid-single or greater organic revenue growth, adjusted operating margin expansion and double-digit free cash flow,” the company said in the NFP announcement.
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