Aon and Willis Towers Watson (WTW), two of the world’s largest investment consultants, have announced a mega merger, in an all-stock transaction with an implied combined equity value of approximately $80bn (€69.4bn).

The combined company, to be named Aon, will focus on the areas of risk, retirement and health.

The move comes a year after Aon pulled out of discussions regarding a potential merger with WTW, which at the time Aon said it was considering potential opportunities as part of regular evaluations of return on invested capital.

Towers Watson merged with rival Willis in 2015 in an $18bn deal to create a 40,000-strong consultancy business. The merger would see further consolidation within the pension consultancy market, which had already seen Towers Perrin and Watson Wyatt merge in early 2010 to create Towers Watson.

John Hale, chief executive officer at WTW, said: “The combination of WTW and Aon is a natural next step in our journey to better serve our clients in the areas of people, risk and capital.”

“This transaction accelerates that journey by providing our combined teams the opportunity to drive innovation more quickly and deliver more value,” he added.

Gregg Case, AON’s CEO, said: “This combination will create a more innovative platform capable of delivering better outcomes for all stakeholders, including clients, colleagues, partners and investors.”

He added: “Our world-class expertise across risk, retirement and health will accelerate the creation of new solutions that more efficiently match capital with unmet client needs in high-growth areas like cyber, delegated investments, intellectual property, climate risk and health solutions.”

The duo announced in a joint statement that Aon will maintain operating headquarters in London, with Haley taking on the role of executive chair with a focus on growth and innovation strategy.

The combined firm will be led by Case and Aon chief financial officer Christa Davies, along with a leadership team with members of both organizations. The board of directors will comprise proportional members from Aon and WTW’s current directors as well.

The statement said the merger would provide an opportunity to expand and further accelerate execution against the two firms’ existing growth strategies.

Vassos Vassou, a professional trustee at Dalriada Trustees, said: “As a trustee, our key concerns when looking after our members are choice, quality of service and value for money. A tie-up between WTW and Aon will mean the combined business will be a dominant player in the market and will lead to less choice for trustees looking for third-party support.”

He said that “when it comes to quality of service and value for money, trustees will need to be alert to any impact on their scheme especially smaller schemes if the combined new business ends up focusing its efforts on large schemes”.

Furthermore, the combined platform generated significant revenue of approximately $20bn and free cash flow of $2.4bn in 2019. The combined firm will be well-positioned to immediately deliver mid-single digit organic revenue growth or greater and, over the long term, double-digit free cash flow growth, it added.

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