Marsh McLennan to Acquire McGriff Insurance Services

Rhea-AI Summary

Marsh McLennan (NYSE: MMC) has announced an agreement to acquire McGriff Insurance Services, through its Marsh McLennan Agency business. McGriff, a leading U.S. provider of insurance broking and risk management services, generated $1.3 billion in revenue for the trailing twelve months ended June 30, 2024. The acquisition, valued at $7.75 billion in cash, will be funded by cash and debt financing. Marsh McLennan will also assume a deferred tax asset valued at approximately $500 million.

The transaction is expected to close by year-end, subject to regulatory approval. McGriff's team of over 3,500 employees, including CEO Read Davis, will join Marsh McLennan Agency while continuing to operate from their existing locations. This acquisition will enhance Marsh McLennan Agency's capabilities across commercial property and casualty, employee benefits, management liability, and personal lines.

Positive

• Acquisition of McGriff Insurance Services with $1.3 billion in revenue
• Enhancement of Marsh McLennan Agency's capabilities across multiple insurance lines
• Addition of over 3,500 experienced employees to the company
• Assumption of a deferred tax asset valued at approximately $500 million

Negative

• Large cash outlay of $7.75 billion for the acquisition
• Increased debt due to partial financing of the acquisition through debt

Insights

Financial Analyst

This acquisition marks a significant strategic move for Marsh McLennan, substantially expanding its insurance broking and risk management capabilities. The $7.75 billion cash deal for McGriff, with its $1.3 billion in trailing twelve-month revenue, represents a multiple of about 6x revenue. This is a premium valuation, reflecting the strategic importance and potential synergies of the acquisition. The deal will be financed through cash and debt, which could impact Marsh McLennan's balance sheet in the short term. However, the assumption of a $500 million deferred tax asset provides some financial offset. The acquisition is expected to enhance Marsh McLennan Agency's market position across various insurance lines, potentially driving revenue growth and market share gains. Investors should monitor integration progress and the realization of synergies post-closing, as these will be important for justifying the premium paid and driving long-term value creation.

Insurance Industry Expert

This acquisition is a game-changer in the insurance brokerage landscape. McGriff's strong presence in commercial property and casualty, employee benefits and personal lines significantly bolsters Marsh McLennan Agency's capabilities. The deal brings together two entities with complementary cultures and client-centric approaches, which is important for successful integration in service-oriented businesses. McGriff's 3,500 employees and established client relationships across the U.S. will provide Marsh McLennan with enhanced scale and market penetration. The retention of McGriff's leadership, including CEO Read Davis, is a positive sign for continuity and smooth transition. This move aligns with the industry trend of consolidation among insurance brokers to achieve scale, expand service offerings and enhance technological capabilities. The combined entity will be better positioned to navigate the complex risk landscape and deliver comprehensive solutions to clients, potentially leading to increased client retention and cross-selling opportunities.

Market Research Analyst

This acquisition positions Marsh McLennan for significant market share growth in the U.S. insurance brokerage sector. McGriff's $1.3 billion revenue indicates a substantial client base and market presence, which will complement Marsh McLennan Agency's existing operations. The deal aligns with the ongoing consolidation trend in the insurance brokerage industry, where scale and comprehensive service offerings are becoming increasingly important. The transaction could potentially reshape competitive dynamics, putting pressure on smaller regional brokers and possibly triggering further consolidation moves by competitors. Investors should watch for potential regulatory scrutiny, given the size and market impact of this deal. Post-acquisition, Marsh McLennan's enhanced capabilities in commercial and personal insurance lines could lead to market share gains and improved negotiating power with insurers. The long-term success of this deal will depend on effective integration, realization of cross-selling opportunities and the ability to leverage combined resources for innovation in risk management solutions.

NEW YORK--(BUSINESS WIRE)-- Marsh McLennan (NYSE: MMC), a global leader in risk, strategy and people, today announced that it has reached an agreement through its Marsh McLennan Agency business to acquire McGriff Insurance Services, LLC, an affiliate of TIH. McGriff is a leading provider of insurance broking and risk management services in the United States, with $1.3 billion of revenue for the trailing twelve months ended June 30, 2024. The transaction will enhance Marsh McLennan Agency’s capabilities across commercial property and casualty, employee benefits, management liability and personal lines.

Under the terms of the transaction, Marsh McLennan will pay $7.75 billion in cash consideration, funded by a combination of cash and proceeds from debt financing. In conjunction with the transaction, Marsh McLennan will assume a deferred tax asset valued at approximately $500 million. The transaction is targeted to close by year-end, subject to regulatory clearance and other standard closing conditions.

“McGriff is a business with excellent leadership, outstanding talent and a record of strong growth. The firm complements Marsh McLennan Agency’s capabilities and culture, and I am excited about future opportunities with them as part of our company,” said John Doyle, President and CEO of Marsh McLennan.

“Marsh McLennan Agency has long held McGriff’s legacy and reputation in the highest regard. Their client-centric focus, culture and proven record of success mirror our own. The firm will be an important addition to the business we have built over 15 years,” commented David Eslick, Chairman and CEO of Marsh McLennan Agency. “Together, our talent and expertise will deliver actionable solutions that help clients build the confidence to thrive.”

Read Davis, CEO of McGriff added: “Marsh McLennan’s global resources and insights will enable us to deliver even greater value to those we serve while creating exciting opportunities for the growth and development of our team. This combination is a reflection of the quality of the McGriff team, and I am excited for our future together.”

Founded in 1886, McGriff specializes in providing commercial property and casualty insurance, surety, employee benefits and personal lines insurance solutions to businesses and individuals across the US. Upon closing, the McGriff team of more than 3,500 employees, including CEO Read Davis, will join Marsh McLennan Agency and continue to operate from their existing office locations.

About Marsh McLennan

Marsh McLennan (NYSE: MMC) is a global leader in risk, strategy and people, advising clients in 130 countries across four businesses: Marsh, Guy Carpenter, Mercer and Oliver Wyman. With annual revenue of $23 billion and more than 85,000 colleagues, Marsh McLennan helps build the confidence to thrive through the power of perspective. For more information, visit marshmclennan.com, or follow on LinkedIn and X.

About McGriff

An affiliate of TIH, LLC, McGriff Insurance Services, LLC is a full-service insurance broker providing risk management and insurance solutions to clients across the United States. The firm’s coverages include commercial property and casualty, corporate bonding and surety services, cyber, management liability, captives, and alternative risk transfer programs, small business, employee benefits, title insurance, personal lines, and life and health. For more information, please visit www.McGriff.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240930309858/en/

Media:

Erick Gustafson

Marsh McLennan

+1 202 263 7788

erick.gustafson@mmc.com

Investor:

Sarah DeWitt

Marsh McLennan

+1 212 345 6750

sarah.dewitt@mmc.com

Source: Marsh McLennan

FAQ

What is the value of Marsh McLennan's acquisition of McGriff Insurance Services?

Marsh McLennan (MMC) will pay $7.75 billion in cash to acquire McGriff Insurance Services.

How much revenue did McGriff Insurance Services generate before the acquisition by MMC?

McGriff Insurance Services generated $1.3 billion in revenue for the trailing twelve months ended June 30, 2024.

When is the Marsh McLennan (MMC) acquisition of McGriff Insurance Services expected to close?

The acquisition is targeted to close by year-end, subject to regulatory clearance and other standard closing conditions.

How many employees will join Marsh McLennan Agency from McGriff Insurance Services?

Over 3,500 employees from McGriff Insurance Services, including CEO Read Davis, will join Marsh McLennan Agency upon closing of the acquisition.