Mergers are all fun and games until antitrust regulators get involved. The EU (European Union) halted the merger between Aon Insurance and Willis Towers Watson before the world was able to see the largest insurance broker to date.
Now, Aon is complying by offering to sell off some Willis assets across the EU. This will shrink Willis's existing $30 billion bid to regulator standards.
Aon is selling Willis assets in five EU nations.
Aon (NYSE:AON) is complying with European Commissioners (as if it has any other choice), who've voiced concerns about the size of the proposed merger. At $30 billion, the deal with Willis (NASDAQ:WLTW) would make Aon the largest insurance broker in the world, effectively putting Marsh McLennan in second place. It would also be the largest deal ever in the sector. Aon and Willis are both headquartered in London.
The assets being sold are all under the Willis umbrella. The company might have to sell more in order to appease the union.
Regulators have until the end of July to make a decision.
EU regulators have been given a deadline extension until July 27 to make their decision about the Aon and Willis merger. The initial deadline was nearly two weeks earlier on July 12. Reportedly, the EU needs the extra time to gather feedback from the brokerage's customers and competition.
Ultimately, the EU regulators have the power to block or pass the deal. However, they could also request more adjustments to the corporate structure if they feel it's necessary to prevent a monopoly. Only time will tell if Aon's latest sell-offs will satisfy the EU.
All about the Aon and Willis merger
Initially, Aon and Willis competed against each other. The merger suggests that things are changing between the two companies. A strategic partnership like this could shift the sector as we know it.
Since the beginning of the COVID-19 pandemic, insurance companies have dealt with a rise in claims. This likely spearheaded the merger agreement, perhaps even rushing it through the process. As we know, mistakes can lead to a governmental investigation, even if the mistakes weren't intentional.
Risks of mega-mergers and why regulators get involved
In large mergers, competition counsel should be involved in the process from the get-go. If not, companies risk being investigated for antitrust. According to Investopedia, antitrust laws "seek to stop price and bid rigging, monopolization, and anti-competitive mergers and acquisitions."
In the Aon and Willis merger, they're adding competition counsel into the mix as we speak, so they might not have addressed the matter early enough. Now, it's coming back to bite them in the butt (even though they might still come out on the other side, as long as they remain complicit).
Antitrust laws are different in the EU than they are in the U.S., especially because you're dealing with a 27-nation entity rather than a single country. Even in this setting, competition is critical to a healthy and consumer-friendly economy. The Singapore government is also getting involved in the investigation since the Aon Insurance business is in the country.