Aon-WTW merger unlikely to impact investments

Gregory Case
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by David Chaplin

The Australasian arms of global consultancy giants Aon and Willis Towers Watson (WTW) could face a major shake-up following the groups’ merger announced last week. But the investment services divisions of the respective firms in Australia and NZ may emerge relatively unscathed from any post-merger synergy-creation.

While both WTW and Aon provide wholesale investment consulting services in Australia, the latter plays directly in the superannuation market with its A$5 billion ‘smartMonday’ master trust.

By contrast, WTW Australia (on the investment side) specialises in manager research while also providing a range of ‘bespoke’ funds to institutional clients. WTW also funds the Thinking Ahead Institute’s global not-for-profit research group.

In NZ Aon offers actuarial investment consulting along with a small super master trust (about $190 million) and a mid-size KiwiSaver scheme of close to $630 million.

WTW has an ‘affiliate’ deal with NZ actuarial consulting firm Melville Jessup Weaver (MJW) but no direct investment representation this side of the Tasman.

David Chamberlain, MJW principal, said the firm was watching the merger news “with interest” but did not expect any changes in the short term. “We continue to have a co-operative relationship with WTW,” Chamberlain said.

Under the arrangement, MJW has access to WTW global manager research and provides advice to its multi-national clients in NZ. Potentially, Aon could shore up the NZ investment and actuarial consulting business with WTW resources once the merger is complete.

But the Aon-WTW tie-up would likely have a greater impact on the respective firms’ insurance and HR consulting divisions where there is more overlap.

According the merger statement: “Pre-tax cost synergies and reductions are expected to total US$800 million three years after completion. Aon and Willis Towers Watson expects about 73% of savings to come from the consolidation of business and central support functions; and about 27 per cent from the consolidation of infrastructure related to technology, real estate and third-party contracts.”

The deal, expected to complete in the middle of 2021, will create an US$80 billion global entity to operate under the Aon brand – the larger of the two businesses.

In an all-scrip merger, Aon shareholders will own 63 per cent of the conjoined business with WTW holding the remainder.

Current Aon chief, Gregory Case, will assume the top job at the merged group with WTW CEO, John Haley, assuming the executive chair role.

“The combination of Willis Towers Watson and Aon is a natural next step in our journey to better serve our clients in the areas of people, risk and capital,” Haley said in a statement. “This transaction accelerates that journey by providing our combined teams the opportunity to drive innovation more quickly and deliver more value.”

Aon abandoned an earlier merger attempt with WTW last March.

In other news last week Mercer, which competes in the same space as Aon and WTW, confirmed a change at the top for its Asia-Pacific business. Ben Walsh, a 26-year veteran at Mercer, will leave the firm at the end of April with Jo-Anne Bloch to take over as Pacific Zone Leader and Australia CEO in the interim.

Walsh has held the dual roles for the last five years.

In a statement, David Anderson, Mercer International president, said Bloch – currently head of industry and public sector superannuation Australia – was “well-known to our clients and colleagues and has long been a well-respected leader at Mercer”.

“We are proud of the achievements of our teams in Australia and New Zealand as they continue to make a difference in people’s lives,” Anderson said. Martin Lewington, Mercer NZ head, reports through to Walsh. However, in recent years Mercer has devolved more independence to country operations including NZ.

– Investment News NZ

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