September 19, 2018 by Greg Meckbach
A US$6-billion merger between Marsh & McLennan Companies Inc. and Jardine Lloyd Thompson Group Plc could form the world’s largest commercial brokerage, and more mergers and acquisitions among commercial brokerages will likely to follow, a Canadian M&A expert suggests.
Marsh & McLennan – Marsh Inc.’s New York City-based parent – announced Tuesday it agreed to acquire London-based JLT. Both firms have multiple offices in Canada and place commercial insurance.
If the merger is approved, this would result in either “the biggest one or one of the biggest” commercial P&C brokerages in the world, Georges Pigeon, a Montreal-based partner with KPMG’s transaction services group, told Canadian Underwriter Tuesday.
Marsh & McLennan and JLT ranked second and fifth respectively in market share worldwide, a spokesperson for Finaccord Ltd. told Canadian Underwriter Tuesday. Finnacord measures market share by commercial non-life broking revenue in 2015.
Finaccord numbers show Aon is leading the commercial non-life insurance broking market, with 10.5% share. Marsh and JLT had 8.8 and 2% respectively – meaning those two firms have 10.8% market share put together.
Placing third and fourth were London-based Willis Towers Watson PLC and Arthur J. Gallagher & Co. of Rolling Meadows, Ill. Those firms had 5.4% and 3.7% market share respectively in commercial non-life broking worldwide.
“The insurance brokerage sector in Canada, the U.S., principally – but also other geographies – has been going through period of significant M&A activity,” Pigeon said in an interview. “At the present moment, I don’t see signs of that abating.”
Tuesday’s announcement came six months after Arthur J. Gallagher acquired Palmer Atlantic Insurance Ltd., a Hartland, N.B.-based brokerage that places trucking insurance.
In December, 2017, Ancaster, Ont.-based Dalton Timmis Insurance Group Inc. was acquired by NFP Corp. of New York City.
Marsh and McLennan said Tuesday it expected to have “cost synergies” of about US$250 million over three years as a result of acquiring JLT.
“From experience, those could include office closings, lease rationalization and possibly some personnel moves” in Canada, said Pigeon, who has provided advice for KPMG clients in more than 100 M&A deals, including insurance providers.
Marsh and McLennan did not go so far as to say it would close any offices.
In addition to Marsh, other subsidiaries of Marsh and McLennan include reinsurance brokerage Guy Carpenter, management consulting firm Oliver Wyman and Mercer, which helps companies provide employee health care and pensions.
Both JLT and Marsh have offices in Toronto, Calgary, Ottawa and Vancouver. In British Columbia, JLT also has offices in Surrey and Victoria. Marsh has offices in Calgary, Edmonton, Regina, Saskatoon, Winnipeg, London, Ont., Kitchener, Ont., Halifax and St. John’s, Nfld.
The agreement to acquire JLT has been approved by the boards of both JLT and Marsh & McLennan. It is still subject to approval from JLT’s shareholders and regulators. It is expected to close in 2019.
It would give JLT shareholders US$5.6 billion in cash and is estimated to have an enterprise value of US$6.4 billion.
In Canada, JLT had revenue of £22.5 million and employed 180 people in 2017, JLT said in its annual report for 2017. The British pound closed Tuesday at $1.71.
Worldwide, JLT reported risk and insurance revenues of £1.066 billion and total company revenues of £1.386 billion in 2017.
For its part, Marsh & McLennan reported worldwide revenues of US$14 billion in 2017, of which US$6.4 billion was from Marsh.