Proposed Business Combination of Aon plc and Willis Towers Watson Public Limited Company

Notifying Parties:

Aon plc

Review Commencement Date:

2 March 2021

Summary of transaction:

(i) the names of the merger parties;

1. Aon plc (“Aon”); and

2. Willis Towers Watson Public Limited Company (“WTW”),

(collectively, the "Parties", each a “Party”).

(ii) a description of the transaction;

This notification relates to the proposed business combination of Aon and WTW in an all-stock transaction (the “Proposed Transaction”). The Proposed Transaction will be implemented by a court-sanctioned scheme of arrangement under Irish law in accordance with the terms of a Business Combination Agreement signed on 9 March 2020, pursuant to which Aon will acquire the entire issued and to be issued share capital of WTW in exchange for shares of Aon.

(iii) a description of the business activities of the merger parties worldwide and in Singapore;

Aon

Aon is a global professional services company active in more than 120 countries and is a publicly traded company incorporated in Ireland and listed on the New York Stock Exchange.

Its business is divided into five business segments, namely:

(a) commercial risk solutions;

(b) reinsurance solutions;

(c) retirement solutions (which includes core retirement, investment consulting and human capital);

(d) health solutions (which includes health and benefits brokerage and health care exchanges); and

(e) data and analytics services.

In Singapore, Aon is active across all of its five business segments.

WTW

WTW is a global professional services firm active in more than 140 countries and is a publicly traded company headquartered in London and listed on NASDAQ.

Its business is divided into four business segments, namely:

(a) human capital and benefits (which provides broking, solutions and software for employee benefit plans, human resources organisations and management teams);

(b) corporate risk and broking;

(c) investment, risk and reinsurance (which provides investment consulting and discretionary management services and insurance-specific services and solutions); and

(d) benefits delivery and administration (which provides primary medical and ancillary benefit exchange and outsourcing services to active employees and retirees).^[1] 

In Singapore, WTW is active in three business segments, namely (i) human capital and benefits, (ii) corporate risk and broking and (iii) investment risk and reinsurance.

^[1] Note that outside of North America, benefits delivery and administration – being pension administration – is provided by WTW’s Technology and Administration Solutions (TAS) team.

(iv) a description of the overlapping goods or services, including brand names;

Aon submits that this notification to the CCCS relates to the supply of retirement benefits consulting services and human capital consulting services.

(v) a description of substitute goods or services;

Aon submits that the substitutes to the Parties’ retirement benefits consulting services are the same services supplied by other competing players including traditional consulting firms and non-traditional competitors (such as boutique firms, insurance companies, tech firms, etc.).

Aon submits that the substitutes to the Parties’ human capital consulting services are the same services supplied by other competing players.

(vi) The applicant's views on:

a. definition of the relevant market(s);

In Aon’s view, the relevant markets are:

• the supply of retirement benefits consulting services no narrow than Singapore, with a potential to be regional; and

• the global supply of human capital consulting services.

b. the way in which competition functions in this market;

Supply of retirement benefits consulting services no narrower than Singapore, with a potential to be regional

According to Aon, suppliers of retirement benefits consulting services generally compete based on price (e.g. competitiveness of their fees offered), quality of service and their ability to provide well-tailored advice.

The market size in Singapore for retirement benefits consulting services is very small, due to the CPF system that Singapore has. Even so, there is a significant number of competitors that compete for the same work and projects in such a small market, which gives clients significant bargaining power.

Global supply of human capital consulting services

According to Aon, clients choose their human capital consultants on the basis of various parameters, including price, service quality and industry expertise.

c. barriers to entry and countervailing buyer power

Supply of retirement benefits consulting services no narrower than Singapore, with a potential to be regional

It is submitted that there are no natural or intrinsic factors and no material legal or regulatory barriers that act as a significant barrier to entry or expansion for potential and actual competitors. While some costs in relation to generic investments would need to be incurred, the only necessary infrastructure for the provision of retirement benefits consulting services is the investment in the acquisition of appropriate software, which is readily available from third party providers or excel-based models can be developed in-house.

In addition, various alternative strategies exist to enter the retirement benefits consulting market in an easy and timely manner. New entrants or competitors seeking to expand their footprint can capitalise on the increasing demand for tailor-made solutions from clients.

Further, the supply of retirement benefits consulting services is a human-capital based market. The key asset to enter or to win new business is employing qualified consulting and actuarial staff who can offer tailor-made solutions to clients, taking into account the specifics of a particular project.

Global supply of human capital consulting services

It is submitted that the barriers to entry and/or expansion in this market are low. Regulatory approvals are not required to enter the market, and unlike industries dependent on physical or financial assets, there are no capacity constraints in human capital consulting. As a result, competition from new entrants or existing competitors seeking to expand their footprint will always be a significant competitive constraint.

The industry is also characterised by short term contracts and low switching costs, which make entry and expansion easy.

Moreover, customers of human capital consultancy services are strong and sophisticated entities, such as global banks, investment funds, automotive manufacturers and technology giants. Such companies are experienced buyers who are able to discipline any attempts at exercising market power.

d. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).

Supply of retirement benefits consulting services no narrower than Singapore, with a potential to be regional

Aon submits that the Proposed Transaction will not give rise to any concerns of coordinated or non-coordinated effects in the relevant market for the supply of retirement benefits consulting services regionally or in Singapore, as:

(a) it will not create nor facilitate the possibility for coordination due to the large number of players and lack of transparency in price, output and even market shares arising from a wide range of products and lack of homogeneity between competitors’ service offerings to customers;

(b) it will not create nor facilitate a credible deterrent mechanism for deviations from the terms of any coordination;

(c) it will not reduce the ability or incentive for non-coordinating firms to defeat any attempt at coordination;

(d) the merger entity will be subject to strong competitive pressure from established competitors who have significant experience in this industry.

Most importantly, the Singapore market for retirement benefits consulting services is already very small in size, and there is already a significant number of rival players competing, which provides clients with a significant amount of countervailing buyer power.

Please also refer to section c. above for a description of the barriers to entry and countervailing buyer power in respect of this relevant market.

Global supply of human capital consulting services

Aon submits that the Proposed Transaction will not give rise to any concerns of coordinated or non-coordinated effects in the relevant market for the supply of human capital consulting services globally or in Singapore, as:

(a) it will not create nor facilitate the possibility for coordination due to the highly fragmented market, large number of players and lack of transparency arising from a wide range of products, lack of homogeneity between competitors’ service offerings to customers and non-transparent pricing;

(b) it will not create nor facilitate a credible deterrent mechanism for deviations from the terms of any coordination;

(c) it will not reduce the ability or incentive for non-coordinating firms to defeat any attempt at coordination; and

(d) the merged entity will be subject to strong competitive pressure from established competitors who have significant experience in this industry.

Please also refer to section c. above for a description of the barriers to entry and countervailing buyer power in respect of this relevant market.

Status:

4 August 2021

CCCS has ended its assessment of the Proposed Transaction in view of the termination of the Proposed Transaction and Aon's withdrawal of its pending notification to CCCS.

Read the media release. 

29 June 2021

CCCS completed its initial review of the Proposed Transaction. Based on information furnished by Aon and feedback from third parties, CCCS has identified areas for further review, pertaining to executive compensation and related consulting services, as a sub-segment under human capital consulting services.

Read the media release.