Six months after it was first announced – and amid significant scrutiny from analysts and investors – Willis Group and Towers Watson & Co. secured shareholder approval for their $8.9 billion merger.
Towers Watson investors were originally concerned that terms of the deal did not reflect the company’s true value. The original deal valued the company at about $8.7 billion and was deemed a “takeunder” by investor Driehaus Capital Management LLC.
All of that changed Friday morning, however, when shareholders approved the combination in separate meetings. Willis had agreed to more than double its offer to $10 a share, and shares of both companies jumped in New York trading.
The deal was engineered to increase Willis’ access to data analytics and allow it to better compete with other major brokers like
Marsh & McLennan and
Aon. However, the merger may have ripple effects that reach even the smallest local agency firms.
According to John Tiene – chief executive with the East Coast-based
Agency Network Exchange – banding together through networks and alliances is the best approach for independents hoping to compete with broker operations like these that are growing increasingly larger.
“The Willises of the world are only going to get bigger and continue to crowd out mid-sized agencies that have historically made up the bulk of the market,” Tiene told
Insurance Business America. “The analytics piece is very important – independent agents have to be as tech savvy and proficient as the bank, the investment house and the corner drugstore,” he said. “Commercial clients especially are now wanting to get insurance online, and agencies have got to get with it and start doing business in different ways.”
Agency Network Exchange recently announced an exclusive deal with Vertafore to provide members with agency management software that includes some of those business analytics solutions. Other technology providers have launched similar tools to help agencies compete with larger brokerages and carriers.
Such capabilities – including the greater market access afforded by membership in a network or alliance – will only grow in importance as 2015 shapes up to be one of the biggest years for insurance consolidation in recent memory.
With the right tools, however, Tiene sees this trend eventually favoring smaller independents.
“The challenge with the bigger, conglomerate brokers is that they haven’t taken time to become efficient organizations,” he said. “Many of their clients feel lost within the labyrinth of a mega broker, and that affords a great opportunity for smaller agencies to take their business by being nimble and providing the kind of service clients want, with the access and influence of a larger organization.”
