Aon and Hewitt Merger
The HR consulting space continues its consolidation. Now that the Towers Watson deal is done, we get the big news of Aon acquiring Hewitt. Some analysts point out that Aon must have been very interested in making this deal a reality — they paid a 4o% premium over Hewitt’s share price. Interestingly, the market reacted a little differently– Aon’s share price was down the day of the announcement on what many considered an up day. It will be interesting to see how investors ultimately view this merger.
My reaction to this $4.9 billion deal is fairly optimistic but I do see a major challenge. On the good side, when you consider Hewitt’s dominance in the large-market HR outsourcing space and combine that expertise with Aon’s mid-market client base and brokerage business, you have to assume this will give the newly merged organization a leg up on mid-market HR outsourcing. In fact, figures released in the merger announcement indicate that outsourcing will contribute 51% of the combined entity’s revenues of around US$ 4.3 billion. What remains a question for me is the human capital consulting side of the business. I believe it will be a challenge to simultaneously build the mid-market outsourcing and brokerage business and expand the firm’s human capital consulting services at the same time. The distractions that come with a merger of this size will limit how much energy can be channelled into these two distinctly different markets.
In any event, I wish them luck and look forward to working with Aon Hewitt in the future.