Aon plc - Hewitt Associates Acquisition
In July 2010 Aon announced its intent to purchase Hewitt Associates, a human resources firm, for $4.9 billion in cash and stock. Aon was already the world's largest reinsurance brokerage, but this acquisition more than tripled the size of its human resources consulting business.
The purchase price was for $50 per share, a large 41% premium on the traded stock price. As is common in such cases, Hewitt's stock price surged 32% on the news, while Aon's stock price dropped 7.1%.
Aon announced it expected to achieve a $355 million savings from combining operations by 2013, mainly from trimming expenses in non-customer or client focused areas. A reveiw of the financial statements shows that their SG&A expenses have remained relatively flat, but net income and free cash flow have grown by over $400 million in the last half dozen years.
The merged firm has revenue (see revenue page) that is reasonably similar between the different divisions, and the different businesses seem to have some common customers and synergy opportunities. The market agrees, with Aon's stock price rising from under $36 a share at time of the merger announcement to above $112 a share now, over a 21% CAGR over the six years since the merger.
The purchase price was for $50 per share, a large 41% premium on the traded stock price. As is common in such cases, Hewitt's stock price surged 32% on the news, while Aon's stock price dropped 7.1%.
Aon announced it expected to achieve a $355 million savings from combining operations by 2013, mainly from trimming expenses in non-customer or client focused areas. A reveiw of the financial statements shows that their SG&A expenses have remained relatively flat, but net income and free cash flow have grown by over $400 million in the last half dozen years.
The merged firm has revenue (see revenue page) that is reasonably similar between the different divisions, and the different businesses seem to have some common customers and synergy opportunities. The market agrees, with Aon's stock price rising from under $36 a share at time of the merger announcement to above $112 a share now, over a 21% CAGR over the six years since the merger.