The decision means the management of AJG and Willis Re have ruled out an alternative name – such as, say, Gallagher Willis Re – when the deal completes, which could be as early as this week (1 December).
There had been speculation that the sheer size of the Willis Re franchise versus the existing Gallagher Re business (see graphic below) alongside the venerable nature of the “Willis” name may lead to a composite brand choice, such as the temporary Aon Benfield moniker chosen when Aon gazumped rival Guy Carpenter to acquire UK reinsurance broker Benfield for £844mn in 2008.
That landmark acquisition remains the largest transaction value for a pure-play reinsurance intermediary, but will be trumped in a few days’ time when AJG’s deal with Willis Re’s parent Willis Towers Watson (WTW) completes.
According to AJG’s 13 August deal announcement, Willis Re has revenues of $745mn, making it third only to Guy Carpenter (2020 revenues of $1.69bn) and Aon’s Reinsurance Solutions ($1.81bn).
We have previously estimated Gallagher Re’s revenues at ~$110mn. The London-based intermediary was founded eight years by former Benfield CEO Grahame “Chily” Chilton as Capsicum Re, in partnership with AJG. Eighteen months ago, AJG exercised its call option to consolidate ownership. The business has particular expertise in UK motor/casualty (its largest unit) and cyber reinsurance but also operates in a number of different areas including direct and facultative.
The rebrand to Gallagher Re came a decade after the US broking heavyweight shuttered its initial Gallagher Re division, a London-based start-up centred around a team of former Benfield executives.
The final regulatory hurdle to the Willis Re acquisition was overcome last week with news that the UK’s Competition and Markets Authority had closed its investigation into the deal.
The competition watchdog said it cleared the acquisition following a so-called Phase 1 investigation and confirmed it would not refer the merger for the more in-depth Phase 2 scrutiny.
In August, AJG agreed to acquire Willis Re for an initial $3.25bn with a $750mn additional consideration payable should the reinsurance broker meet certain third-year revenue targets, with the deal valuing the broker at approximately 15x Ebitda.
The valuation was an uplift on the estimated 9x Ebitda valuation that had been placed on the reinsurance broker as part of its previously proposed sale that it was hoped would enable the Aon-WTW deal to gain antitrust approval.
When the Aon-WTW talks ended – following onerous antitrust scrutiny from regulators in Europe and the US – WTW was no longer obliged to proceed with the spin-offs. However, the willingness of AJG to increase its valuation, together with the enthusiasm of Willis Re management to proceed with the deal, shortly culminated in the largest ever sale of a reinsurance intermediary.
As this publication noted last week, the only remaining stumbling block from the perspective of Willis Re’s new owner and existing management is any frictional fallout from the handover of the business via a Transfer of Undertakings (Protection of Employment), or TUPE, arrangement remaining.
The TUPE process protects UK staff from receiving less favourable terms from the new employer, while they can also choose not to accept the transfer and walk away without any restrictions. It is necessary because Willis Re does not exist as a distinct legal entity.
When combined, Gallagher Re is expected to be led by current Willis Re CEO James Kent, who has gained plaudits for keeping the business on track despite the uncertainty caused by the Aon-WTW deal saga.
AJG was contacted for comment.
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