July 26, 2021 by Greg Meckbach
Amid the uncertainty over Aon PLC’s now-scuttled plan to acquire Willis Towers Watson PLC, Marsh & McLennan Companies Inc. increased its staff level by nearly 2,000 during the first half of 2021, Marsh & McLennan CEO Dan Glaser says.
“We are hiring. The first six months of the year, [our] head count has grown nearly 2,000. Most of that is coming within [commercial retail brokerage] Marsh as they are capitalizing on the opportunity they see with their two biggest competitors [Aon and Willis] having some element of distraction and uncertainty,” Glaser said July 22 during an earnings call.
Glaser was alluding to Aon’s agreement to acquire Willis Towers Watson. He made his comment four days before Aon and Willis announced they had mutually agreed to terminate their merger agreement. Marsh, Aon and Willis are the world’s top three commercial P&C brokerages, respectively, when measured by annual revenue in 2020, A.M. Best company Inc. reported July 1.
New York City-based Marsh’s parent company is Marsh & McLennan, which has a number of other operations, including reinsurance brokerage Guy Carpenter and consulting firms Mercer and Oliver Wyman.
During the July 22 conference call discussing Marsh and McLennan’s financial results for the quarter ending June 30, an analyst asked company officials about their outlook for margins and expenses in the second half of 2021.
Marsh & McLennan’s biggest growth in expenses, in the most recent quarter, was in pay and benefits, said Glaser. This was due in large part to its recent hiring spree.
It was August, 2020 when shareholders of Aon and Willis voted in favour of their merger, valued at the time at about US$30 billion. But that proposed deal – originally announced in March of 2020 – was subject to regulatory approval in multiple jurisdictions.
The United States federal justice department announced June 16, 2021 that its anti-trust division was asking an American court to block the deal.
On July 26, Aon announced the firms mutually agreed to terminate the deal.
“It’s clear that the issues with Willis and Aon in particular are creating a short-term opportunity [for Marsh to find talent] that will run its course one way or the other,” Glaser said July 22 during Marsh & McLennan’s earnings call.
In reply to an analyst’s question, Glaser said July 22 that the regulatory issues that got in the way of the Aon-Willis deal has not changed Marsh and McLennan’s view of mergers and acquisitions.
In 2019, Marsh & McLennan closed its US$5.6-billion acquisition of global commercial P&C brokerage Jardine Lloyd Thompson. As a result, Marsh & McLennan overtook Aon as the world’s largest commercial P&C brokerage.
“JLT was an anomaly in some ways. It was perhaps our biggest acquisition in history,” Glaser said July 22.
Glaser described Marsh’s general pattern of acquisitions as a “string of pearls” over a long time, rather than one “mega acquisition,” which is why JLT was an exception.
“Basically, we like buying firms that are high quality, where the leadership team generally remains in place, [that have] recurring revenue streams, high cash generation, low capital requirement and a history of success. That sets it up for us. It’s really getting to know each other over long period of time.”
The acquisition “pipeline remains strong for us,” Glaser said.
“Multiples are higher than what we would like and we need to be very selective and very careful in our valuation of pro forma results. Most of the companies we look at are private.”
In the second quarter of 2021, Marsh and McLennan reported net earnings of US$827 million on revenue of US$5 billion. This compared to net earnings of US$527 million on revenue of US$4.19 billion in Q2 2020.
Feature image via iStock.com/katleho Seisa