decor decor
"If everyone is moving forward together, then success takes care of itself."

-Henry Ford

Willis Group to Acquire Towers Watson in Merger of Equals

martinwolf Transaction Analysis
Financial Information
  • Transaction Size: $8.6B
  • Enterprise Value: $7.8B
  • EV/LTM Revenue: 2.1x
  • EV/LTM EBITDA: 10.9x 

Transaction Facts

  • Willis Group Holdings (NYSE:WSH), an insurance broker and risk management advisory firm, announced today that signed a definitive merger agreement to acquire human resources consulting firm Towers Watson & Co. (Nasdaq:TW) in an all-stock merger.
  • The new company, Willis Towers Watson, will have 39,000 employees in more than 120 countries, a total revenue of about $8.2B and an equity value of about $18 billion.
  • Willis Group shareholders will own 50.1% of the combined group and Towers Watson shareholders will own the rest.

Not the Usual Numbers

  • Typically, buyers pay a premium over the sellers’ share price. However, in this case, Towers Watson shareholders are receiving the equivalent of $125.13 a share as of Monday’s close (compared with its Monday closing price of $137.98). This resulted in the company’s share price dropping more than 8 percent. Towers Watson Chief Executive John Haley attributed this to an exchange ratio set in May that used a 60-day moving stock-price average showing the companies as more equal in terms of market cap. This could create an obstacle for the deal.

Cost Savings in Tightening Space 

  • Margins are Key: In an increasingly competitive services space, increasing margins is critical to success. This deal achieves tax savings: the merged company will be domiciled in Ireland, cutting taxes from Towers Watson’s current rate of 32% to an expected “mid-20% range.” In addition, the companies expect cost synergies of $100 – 125 million.
  • Achieving Scale When Growth Is Slow: In a market with declining organic growth, acquisitions can be key for achieving scale. Following this merger, the combined company will advise over 80% of the world’s top-1000 companies, with Towers Watson using Willis’ key mid-market relationships to expand business to more than 80 countries, and Willis benefiting from Towers Watson’s relations to penetrate into the US property/casualty insurance corporate market.

For more information about this transaction, click here to read the press release.

 
martinwolf was not the advisor in this transaction.
previous post Back to Articles next post

17 Mar 2020

martinwolf COVID-19 Response

With all the news and concern surrounding COVID-19 and its resultant market impact, we at martinwolf wanted to reach out. First, and above all, to say that we hope...