Shelved, for now The appetite for mergers and acquisitions has evaporated as the pandemic sends the global economy into a tailspin. But for some, adversity also brings opportunities By Bernice Han
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n March 9 Aon finally made its move, announcing a near $US30 billion all-stock deal to acquire smaller rival Willis Towers Watson. The union, if approved by shareholders and regulators, will create the world’s largest insurance broker by value of about $US80 billion. Not only is the deal the insurance industry’s largest ever, besting the $US28.3 billion that Ace splashed out in 2015 for Chubb, it is also the biggest merger and acquisition (M&A) of any kind globally so far this year. After abruptly walking away from a merger deal with Willis Towers Watson last year, Aon decided the timing was right. But the powers behind the blockbuster deal might have hesitated again if they had foreseen what was coming within days – financial markets going into meltdown, spooked by grave fears that the COVID-19 pandemic may drag the global economy into its worst recession in decades. Aon shares fell 16% on the day the deal was announced, although whether the merger had much to do
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with it is impossible to gauge. Similar sharp falls were taking place on Wall Street and other key financial markets. The bellwether Dow Jones Industrials index plummeted 2000 points on that day, and oil prices tanked 20%. Since the Aon announcement, investor mood has turned considerably darker, and by extension so has the sentiment for any M&A deal-making. The immediate focus for insurers, like their peers in other industries, will be on the rapidly declining health of the global economy, the result of lockdown measures imposed in many countries to try to slow the spread of the virus. Scott Guse, KPMG’s Brisbane-based Partner for Audit, Assurance and Risk Consulting, tells Insurance News that the M&A appetite of companies here and around the world “is off the table for the near term while we go through this pandemic. Liquidity and cash are kings these days.” KPMG has spoken with two dozen of its M&A insurance clients globally, and it appears the industry is
