Saturday, July 24, 2010

Aon to buy Hewitt

Aon Corp will spend $4.9 billion, issue 64 million shares and pay a 41 percent premium, to buy Hewitt Associates Inc, in an aggressive, pre-emptive bid to beat archrival Marsh and McLennan. This deal would create the world's largest human resource services company. It even surpasses the $4 billion Towers Perrin and Watson Wyatt merger in January 2010.

In recent times, there has been a trend towards consolidation in HR for the purpose of cost cutting, greater efficiencies and larger scale. Aon had been looking for opportunities to expand its consulting business, and to become the biggest, Hewitt was the obvious choice, especially with its good brand. There is not much overlap in the clientele of Aon and Hewitt as Aon focuses on middle-market companies while Hewitt focuses on large companies.

In 2009, the revenue of Aon's consulting business was about $1.2 billion, which is expected to grow to $4.3 billion with the addition of Hewitt consulting. Aon also expects to generate about $355 million in annual cost savings in 2013, primarily from reduction in back-office areas.

The deal is expected to close by mid-November.


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