Management consulting firm Aon said on Wednesday it will buy privately held NFP in a deal valued at about $13.4 billion to tap the fast-growing middle-market segment of insurance brokerage, wealth management and retirement plan advisory.
Demand for insurance products has remained firm in an uncertain economy and the sector is considered recession-proof as many policies are often guaranteed by employers, while some are mandated by the government.
The deal with funds linked to private equity owner Madison Dearborn Partners and HPS Investment Partners is expected to close in mid-2024 and will be funded with $7 billion in cash and $6.4 billion in Aon stock.
The cash portion will be funded through a new debt of $5 billion in 2024 and the rest at the close of the deal while trying to keep the current credit rating, Aon CFO Christa Davies said.
Aon shares fell 8% in morning trading as the company expects to incur $400 million in one-time transaction and integration costs related to the deal.
Initially, the combined firm’s adjusted operating margin could be lower than Aon’s standalone margin. However, we expect to continue to drive adjusted operating margin expansion over the long term,” Davies said.
Founded in 1999, NFP is a property and casualty brokerage, which offers benefits consulting, wealth management and retirement plan consulting for clients with more than 7,700 employees.
Insurance brokers serve as a bridge between an insurer and its customers, helping clients find a policy that best suits their needs.
NFP will generate an estimated $2.2 billion in annual revenue this year, Aon said in an investor presentation. It forecast a roughly 14% rise in total revenue in 2024 and 2025.
Its CEO Doug Hammond will continue to lead the business and will report to Aon President Eric Andersen.
UBS Investment Bank was the exclusive financial advisor to Aon on the transaction. Citi is advising it on the deal financing.