Aon drives into US mid-market with $13.4bn acquisition of NFP broker
Global insurance broker Aon will buy privately-held mid-market broker and benefits group NFP from the firm’s leading financial investors in a cash and equity deal estimated at a full $13.4 billion.
“The acquisition of NFP expands Aon's presence in the large and fast-growing middle-market segment, with capabilities across risk, benefits, wealth and retirement plan advisory,” Aon management said of the deal.
The price tag, pegged to roughly 15x EBITDA earnings, will be funded through $6.4 billion in Aon stock and $7 billion in cash, for which Aon will reach for fresh debt. The price estimate is based on expectation of a June 30, 2024 closing date, but conditions and regulatory approvals have yet to be cleared.
NFP brings $2.2 billion of 2023 revenue to Aon and an outlook for 14% annual growth moving forward, Aon said. Revenues are 48% from health, 35% from commercial risk and 17% from wealth. The group is US-heavy, with 88% of revenue in the US and the remainder in Canada and UK. NFP boasted 6% average organic revenue growth 2019-23 with total revenue and adjusted EBITDA growing at 14% and 15% CAGR respectively.
The purchase is expected to be earnings-dilutive for Aon in 2025 on some $400 million in one-off transaction and integration costs, then turn earnings-neutral in 2026 as synergies kick-in and free cash flow impact turns positive. Revenue synergies start at $80 million in 2026 and hit a long-term run rate above $175 million from 2027. Cost synergies begin at $30 million in 2026 and ramp up to over $60 million after 2027.
NFP will retain some independence, operating as an independent but connected platform and going to market as "NFP, an Aon company." Doug Hammond, chairman and CEO of NFP, will continue to lead the business, reporting directly to Eric Andersen, president of Aon.
Aon considers NFP a leader in property and casualty brokerage, benefits consulting, wealth management and retirement plan consulting for middle-market clients with more than 7,700 employees.
Greg Case, CEO of Aon, commented: “The acquisition will advance our relevance to clients, create opportunities for our colleagues and further strengthen our shared cultural values. Doug and NFP have built an exceptional team, with a complementary one-firm mindset, and we expect to both learn from their entrepreneurial culture and share with them the depth and breadth of our capabilities to create more value for clients, colleagues and shareholders."
Eric Andersen, president of Aon, added: “NFP has one of the most high-performing leadership teams and cultures that I've come across in the marketplace in my 30-plus years in the business. NFP's team shares our one-firm mindset and commitments to client excellence and growth, and I'm looking forward to working with Doug and all the colleagues at NFP when they join our firm as an Aon company.”
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