Editor’s comment: The death of the mega deal?

So surely the collapse of the deal in the face of US antitrust concerns, despite it gaining approval from the European Commission, must be the biggest story of 2021 and the aftershock could continue for some time.

Willis Towers Watson now has to make sure it can stand on its own two feet again and Carl Hess – its hastily established replacement for CEO John Haley, who was only staying to see the merger through and departs at the end of the year – will have his work cut out. 

While the deal was undergoing prolonged regulatory approval the broker unsurprisingly lost scores of personnel, which will take time and money to replace. In addition, the $4bn Willis Re deal is still on which will see Gallagher challenge its place outside the top three traditional brokering houses.

Flying solo again WTW will need to show its shareholders it has a definitive vision, or investors/competitor brokers might start vying for parts of the business – its healthcare and network look particularly attractive. So WTW needs to come out quickly to explain what WTW 2.0 is all about because the longer the uncertainty goes on, the greater the risk of losing teams or private equity swooping in. What WTW does have in its favour is the funds on its balance sheet and the $1bn termination fee due from Aon allowing it the chance to come back fighting with an acquisition plan or major share repurchase.

Whereas Aon faces $350m of extra costs for the failed venture and the reputational impact of the unsuccessful deal. However, its management team led by CEO Greg Case – who has had his contract extended until 2026  – does have a track record of good organic revenue growth and steady margins.

For the sector the fact the process was played out in full public view and was ultimately unsuccessful potentially raises questions about what it means for future mega deals. Undoubtedly there will more interest from the antitrust regulators now and firms will possibly look to significantly streamline their businesses ahead of possible mergers - in a similar way to Aviva deconstructing its overseas operations - otherwise they could also face the long drawn out negotiations that ultimately killed this deal.