Focusing on investment consulting,yesterday, Marsh & McLennan Companies Inc. (MMC) announced its definitive agreement to purchase a part of Evaluation Associates LLC, which is a subsidiary of Miliman Inc., for an undisclosed amount.
The deal is expected to close by the end of the second quarter of 2011 subject to regulatory approvals, although other terms are yet to be revealed.
Accordingly, post acquisition, Evaluation’s wealth management segment will be merged with the operations of Marsh & McLennan’s Mercer, the leading consulting, outsourcing and investment services unit of the company, and will jointly create additional investment capacities and consulting opportunities in the private wealth caremarkets in the US.
Meanwhile, the public sector investment consulting business of Evaluation Associates is reported to be acquired by Callan Associates Inc. Through such an alliance, Mercer and Callan proposed to operate on a common platform, albeit with separate strategic objectives in the investment consulting field.
With assets under advisement of approximately $200 billion and 115 clients, Evaluation ranks as the 17th largest investment consulting firm worldwide and would fit in well for boosting Marsh & McLennan’s wealth investment consultancy.
Marsh & McLennan has been continuously expanding its investment consulting space through Mercer. In January this year, Mercer completed the acquisition of Hammond Associates, which significantly strengthens Mercer's US investment consulting position in endowments and foundations.
The acquisition of Evaluation Associates’ wealth management segment further complements the operational efficiencies brought in by Hammond Associates and will together help Mercer to grow through their strong clientele and financial intermediaries.
This again strengthens Mercer’s strategies of providing expert wealth management solutions and spreading out across the US, expanding its Defined Benefit and Defined Contribution consulting position.
Furthermore, after the successful asset dispositions of its redundant Kroll and Putnam units, such acquisitions bode well for the overall restructuring of Marsh & McLennan.
While the company is able to concentrate on its core efficiencies, Marsh & McLennan’s unutilized $1.0 billion revolving credit facility along with expected tax benefits in the upcoming quarters shall provide cushion to the company’s liquidity, thereby eliminating significant risk on the company’s financial leverage.
The acquisition is also crucial for new business production and client retention, which has been facing substantial declines due to the company’s antitrust litigation charges coupled with a soft pricing environment.
Overall, as a leading global broker, Marsh & McLennan has a history of outperforming its peers owing to its size, diverse product offering, global presence and technical expertise. Despite sluggish organic growth, the company is still a dominant player in its industry, quite next to the leading Aon Corp. (AON).
While the Guy Carpenter brand, holding a quarter of the market share, has been improving through cross-selling opportunities, new business production and high retention rates; Mercer’s investment consulting and management wing continues to generate robust growth, contributing to the fundamental strength of the company. We believe a stable economy and improvement in the insurance cycle should help boost both the insurance brokerage and consulting business.
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