Aon closes $13.0bn takeover deal with NFP in major boost to mid-market aspirations

Aon closes $13.0bn takeover deal with NFP in major boost to mid-market aspirations

25 April 2024

Aon has closed its $13.0bn takeover deal for middle-market specialist NFP, sealing one of the biggest insurance broking M&A deals in history.

The deal was initially announced in December, and passed a key antitrust milestone in late February as it became clear the US Department of Justice would not stand in its way.

Aon said Thursday that the acquisition expands its presence in the large and fast-growing middle-market segment, with more than 7,700 colleagues and capabilities across property and casualty brokerage, benefits consulting, wealth management and retirement plan advisory.

As an Aon company, NFP will operate as an “independent and connected" platform delivering risk capital and human capital capabilities from across Aon. NFP will continue to be led by current CEO Doug Hammond, reporting into Aon president Eric Andersen.

The earlier-than-anticipated close date contributes to expected accretion and free cash flow benefit realization a year earlier than modeled at announcement, Aon said.

Greg Case-led Aon had previously said the transaction will be dilutive to adjusted EPS in 2025, breakeven in 2026 and accretive in 2027 and beyond, and that positive impacts to free cash flow will begin in 2026.

Aon has now said it will provide further updates on NFP and deal financials, along with its financial results, guidance, and outlook during its previously scheduled earnings call on 26 April.

“It is a historic day for our firm as we welcome NFP to Aon and work together to help clients address increasing volatility across risk and people issues,” said Greg Case, Aon’s CEO, in a statement.

“With high performing teams and leading content and capability – further enabled by our Aon Business Services operating platform – we will create more value for our clients, while also enhancing long-term shareholder value creation for investors,” Case added.

“This acquisition is another example of how we are going further, faster with our 3x3 Plan to accelerate our Aon United strategy and further enhance our relevance to clients," Case concluded.

Aon president Eric Andersen also commented on the deal.

“The idea of being ‘independent and connected’ is key to how we will collaborate and create more options for clients across our risk capital and human capital capabilities,” Andersen said.

“Doug and his team have built an exceptional client-centered business and we are focused on using our Aon Business Services platform to scale delivery of new capabilities to small and middle market clients across Aon and NFP," he added.

NFP CEO Hammond said that with the Aon deal completed, his firm is embarking on “an exciting new chapter in our company’s history”.

“We look forward to the positive impact that our complementary expertise and capabilities will have on all stakeholders,” Hammond commented.

“Aon’s diverse resources and global reach enhance our ability to serve the dynamic risk, workforce, wealth management and retirement needs of our clients. We remain focused on both advancing a culture colleagues want to be part of and working together to contribute to our collective growth and success,” Hammond concluded.

Aon had previously said announced the deal at a $13.4bn purchase price that would have represented a 15x multiple of seller-adjusted estimated Ebitda at closing, with the deal to be funded by $7bn of cash and $6.4bn of Aon stock.

It is expected to generate more than $2.8bn of value creation based on expected pre-tax synergies and capital structure, net of ~$400mn of one-off transaction and integration costs.

After the initial announcement, Aon said it will look to enhance NFP’s “strong” existing distribution with content and capabilities from its Aon Business Services platform as it takes aim at the $30bn US middle market in risk, health and wealth.

Aon purchased NFP from funds affiliated with NFP's main capital sponsor, Madison Dearborn Partners, and funds affiliated with HPS Investment Partners for an enterprise value of $13.0bn, including $7bn cash and assumed liabilities as well as $6bn in equity in the form of 19 million Aon shares.

UBS Investment Bank served as the exclusive financial advisor to Aon on the transaction.

Citi served as a financial advisor and is advising Aon on the transaction financing.

Cravath, Swaine & Moore LLP and McDermott Will & Emery LLP acted as external legal counsel to Aon.

Evercore acted as lead financial advisor with support from Barclays, BofA Securities, Inc, Deutsche Bank Securities Inc, Jefferies LLC and TD Securities to NFP.

Skadden, Arps, Slate, Meagher & Flom LLP and Ropes & Gray LLP acted as external legal counsel to NFP, and Paul, Weiss, Rifkind, Wharton & Garrison LLP acted as external legal counsel to NFP’s capital sponsors.

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