Willis Towers Watson — as it’s now called — issued a report on mergers and acquisitions for 2016. Expect more of what we’ve seen the last couple of years. And if anything, it’s going to grow more intense as we move through the decade.
Or that’s what the senior execs polled by Willis Towers Watson said. A whopping 82% noted their firms plan acquisitions in the next few years. Just a third — 33% — say they’re going to divest rather than invest.
Revenue growth is pushing the M&A activity. In 2015 it led to 111.4 billion Euros — or $118.7 billion — worth of deals in the first three quarters. That’s nearly three-times what we saw in 2014.
Here’s what the executives said made them make the moves they made:
• More revenue
• Enhancing market position
• Increase customer base
• Consolidation drove four megadeals in the U.S. in specialty lines.
• The price tag hit $5.3 billion. The four are three more than the one we saw in 2014.
• The survey also noted there were 25 deals worth $532.7 million or more in 2015.
Willis Towers Watson M&A global leader Jack Gibson said the trend will continue and the competition to do a deal is growing more intense. “Just 4 percent of deals proceeded without competition from other potential buyers. Incumbent local insurers are fighting hard, international competitors are also trying to cherry-pick the best deals, and an increasing threat is posed by emerging players such as private equity and non-insurance investors from Asia,” he said.
Before 2018 at least half of the firms in North America say they’ll be making one divestment because of consolidation and the importance of being more efficient. Here’s more:
• Some are setting higher criteria for those not willing to accept an offer.
• That’s on deals offering a 13.8% return on capital for P&C and 14.2% on life.
Willis Towers Watson urges caution for insurers going that direction. They A) need to be more selective and B) be prepared for an upward pressure on prices and more intense negotiations to complete a deal.
• 80% say they’re going to focus M&A activity on core markets.
• 8% will go after companies with markets that aren’t their core.
• Distribution is the key driver of more than 33% of the deals.
Gibson said distribution is likely to become even more important as insurers start looking for new markets and higher revenues. “Reinventing distribution so it is fit for purpose in the evolving marketplace is a major challenge. Digital platforms feature strongly on insurers’ wish-lists and the desire to access and secure new technologies is a key element of many transactions.”
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